As most consumers in the marketplace probably realize, there is no absolute correct answer to the following topic. But we can help you walk through the process to determine if renting or buying is best for you. Some say that renting is like "throwing away money". We will show you why that just isn't true. Here are some scenarios to consider.
When to Buy
For some, there is no greater achievement than owning a home. But you just don't want to jump in blindly. Here are some items to mull over.
Home prices usually do go up, but not always. There are many details that go into these deciding factors. One of the most important is the quality of the school district. Parents want to sent their kids to have a great education. And if the potential home is zoned to an award-winning school, then it's safe to say the overtime the home will appreciate in value. Just ask your realtor how often their customers ask which schools the potential home is zoned to. More demand for certain schools will increase the value of homes.
You are Going to Be Here Awhile
If you have a stable occupation or don't plan on moving for a long time, then buying probably is for you. Even if the economy tanks and the housing market softens, it won't factor you the least bit. You are in it for the long haul. Your home loan is probably 15-30 years, so you have plenty of time to wait it out.
Interest Rates are Low
If you are taking out a home loan, then interest rates will most certainly factor into what you can afford. When interest rates are low, you can afford more home. But when they increase, so will your monthly payment. Many would be buyers have lost their home because they failed to lock in an interest rate.
And by the time they did, they couldn't afford the monthly payment. Look at the example below to see how interest rates affect your final payment. This also brings up back to the topic of rent. When you take out a mortgage, you are paying a fee to the bank in essence. This is similar to rent. We haven't even discussed property tax which is an entirely different but equally as important issue.
30 year Loan ( No insurance or property tax included)
$300,000 Loan 4.5% Interest Rate (30 years) Payment: $1520.06
$300,000 Loan 4.875% Interest Rate (30 years) Payment: $1587.62
$300,000 Loan 5% Interest Rate (30 years) Payment: $1610.46
Check over here for Mortgage Calculator
When to Rent
There are certain situations when it's not even debatable. Renting a house or apartment is the clear answer under these certain situations.
You don't have a job.
If you don't have a solid stream of income then there is not a reason for you to purchase a home. Chances are you couldn't find a lender to loan you the money for the home. But it's as clear as day. Wait until you have a solid income stream from your occupation. Of course, if you have the cash in the bank to pay for the house outright, then obviously this wouldn't apply to you.
You might be moving soon
Maybe you are thinking about relocating to a different city. Or rumors are that your job is going to be transferring you. Under these uncertain conditions, renting would be the smart choice here. It's super easy to get out of a lease. Selling a home takes time. And if your house is in a buyer's market, then this will be no easy task. Remember in most markets the seller has to pay the commission on the home.
You don't have money for a Down Payment
Most lenders want you to put something down. In today's environment, you can probably find a lender that will allow you to finance 100% of the value of the house. But you're not setting yourself up in the best possible situation. Coming up with a 10-20 percent down-payment or more will allow you to pay off the house faster.
About the Author: Andrew Reichek is a real estate agent at Rentkidz, an apartment locating company in Texas. Renters here can find the top apartment deals. Rather than contact properties personally. You can find Rentkidz Facebook page here.
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