According to a recent report from RentCafe, the national average for rent has gone up $300 since 2011. These higher rent prices are leading many to consider homeownership over paying a monthly payment that may go up with each renewal. With the cost to borrow money still at historic lows, interest rates are also fueling reasons to buy instead of renting a home.
If you can swing a mortgage that is comparable to what you pay for in rent, it seems like a no brainer to buy rather than pay someone else’s mortgage and help them build equity for the long haul. However, the choice between buying and renting a home is among one of the most important financial decisions you can make, and it shouldn’t be taken lightly. It’s a long-term purchase with a number of responsibilities that go past the renter’s purview.
Home buyers that opt for a fixed interest rate mortgage will protect themselves against rent increases, but they will be responsible for other expenses they didn’t have as a renter, such as, maintenance costs, taxes, Home Owners Association (HOA) fees, and home and mortgage insurance. As a renter, these expenses are generally paid by the landlord. As an owner, you’ll be responsible for these costs, and a new water heater if yours suddenly quits.
But, there is something to be said about owning your own home, a part of the “American Dream”, and there is real value beyond financial. Here are a few key questions to ask if considering buying a home instead of renting.
How much can you afford?
If you are sure buying a house is what you want to do, make sure you don’t spend more than you can afford. You don’t want to be put in a tough financial situation should your income disappear or drop, or a major expense creeps up. Run some scenarios and find a reasonable mortgage payment that you can manage.
How long do you plan to stay?
The longer you plan to stay in a home the greater value it can be to you. If you plan to stay longer than five years, you will be able to spread out the initial home buying costs over time and eventually build equity in the home. Additionally, buying the right house depends not only on your current needs, but your future needs. If you are planning to have a family, or grow your existing one, you’ll want to make sure you have enough room to accommodate kids in the coming years if you don’t want to make another move in the near future.
Is the local market conducive to home buying?
One of the largest factors to consider when looking for a home is the local market, and this is not something you can control. If you need a three bedroom, three-bathroom home in a specific area of town and there aren’t any available, you’ll have to wait, or reassess your needs and wants. In addition to availability and affordability, you want to make sure home values are stable and reasonable where you are looking.
A good real estate agent will have their finger on the pulse of the local market, be able to get you competitive marketing analyses to help determine home values, and know how and where to find what you are looking for.
Knowing what you can afford, whether or not you want to put down roots, and what the local market looks like is a great place to start from when considering a home purchase. For expert advice and assistance in determining whether or not it’s the right time to buy for you, contact Park Avenue Properties at (719) 548-9900.