This age-old question must be made on an individual basis and each family must answer some prep questions before deciding.
Mobility
Are you ready to move every year or every other year if necessary?
Owning your own home provides stability, however renting is volatile, you may be faced with a myriad of conditions which require that you move. The rent may become too high, the landlord might default on major repairs, you may hate the neighborhood due to deterioration or a high crime rate, and so on. Factored into to the moving is the cost for the movers, and reconnection fees as well as broken or lost items resulting from the move. Often time’s children have change schools and the day-to-day lives of family members are disrupted several times during the course of their life times.
According to psychologists, moving is one of the major life stressors. Owning your own home would mean that you are planning on staying in one place and that would reduce a lot of this stress.
What is the shape of your financial situation?
With the current job employment situation in America, how stable is your current employment, then you must add in the job of a spouse who may be helping you with a mortgage should you decide to buy. Rents are high, but the opportunity to move is present, when you own your home you are locked into a mortgage for many years or face a foreclosure if you do not have the money and were unable to sell.
Can you afford to buy a home?
You may not qualify for a home if your total household expenses including taxes, insurance, mortgage, utilities, credit card car payments, food, and all other expenses is more than 33 – 40 percent of your gross income. On the other hand, the renting of apartments in your preferred area may be so high that the mortgage on your house would be much cheaper in the long run, and you have the added bonus of owning property that will appreciate in value over time.
Comparison of renting vs. owning
Looking at the example of renting vs. buying the same 1000 square foot townhouse; the cost for renting is approximately $850 a month then add on utilities which is about $150 more a month on average (subject to where you live). If you buy the same townhouse for $90,000 and give a 10 percent down payment, and your mortgage is set at 8 percent, you would be paying $640.00 mortgage, $150 condo fees, and about 100 dollars in taxes. The total amount would be $1,040 per month. When you look at it, it comes out to only 40 more a month (to own your home than) to rent the same place ($850 + 150 utilities).
A homeowner should set aside an additional 2 percent each year for maintenance and repair. This will cover emergencies as they come up. A homeowner must also realize that there will be start-up costs, such as closing fees, legal fees, and transfer fees and so on.
In our example, these costs would amount to an additional $4,500 dollars; but, it is a one time cash payout.
The financial considerations for purchasing a home
All in all, this example represents a down payment of 10 percent with an interest rate of 8 percent on the mortgage, total costs will depend on these factors and your home will cost you approximately 20 to 30 percent more than renting.
Home equity and return on your investment
You don’t have these fees if you rent, you just take up and go, but, you don’t have anything to show for all your years of renting either. You don’t have home equity, you don’t have a home. In either situation you can fall on hard times; if you rent you are kicked out without a place to live. If you own your own home, you can sell and at least get something back from your investment. Depending upon the investment return you may be able to purchase a less expensive home or rent and invest the monies into other areas. For more information and guidance when considering purchasing your home, turn to the real-estate experts at Canseco Group. http://canseco.com/
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