You might be wondering if the time is right to buy your first home. But how do you decide whether it’s better to continue renting or purchase your own home? How is it that people come to realize that they are truly ready for homeownership?
It's not uncommon for people to approach purchasing their first home with a ton of doubt and questions. After all, it can feel like a complicated process, especially considering how quickly you need to act in a housing market that’s hot like it is right now.
With all this in mind, let's answer some of the big questions you might have about homeownership.
Renting vs. Buying
Is buying a home a good investment? Owning a home is how most Americans build their wealth. But depending on your current financial circumstance, buying a home isn’t always a better option than renting. Renting offers flexibility and predictable monthly expenses since you aren’t responsible for paying for total up-keep. Still, homeownership brings with it intangible benefits such as a sense of stability, and unlike rent, mortgage payments with a fixed rate conventional loan won’t increase with time.
It’s imperative to weigh each option's pros and cons before deciding what’s best for you.
What are the Advantages and Disadvantages of Renting?
Renting allows you a more hands-off approach to your living situation. But like with most things in life, there are both positives and negatives to consider.
Pros of renting
- There is no long-term commitment.
- You have to pay fewer upfront costs, and there is less paperwork involved.
- There is little to no responsibility on your part to pay for essential repairs and maintenance.
- It can help you build up your credit since most property managers report rent payments to credit bureaus.
- You also have the freedom to be more mobile as rental properties allow shorter term leases making it easier to relocate for business or personal preferences.
Cons of renting
- Rental prices tend to go up each year. The landlord can also decide to sell the property at any time, forcing you to look for a new home.
- Rental payments do not build equity.
- There are no tax benefits to renting, unlike owning a home.
- The amenities offered can be old or out-of-date.
- There’s little freedom in how you can update or customize your space.
- Renting offers less stability than owning a home.
- While you don’t have to pay for essential repairs and maintenance, you will have a security deposit to pay for any damages while renting.
Why Homeownership Is Worth It
Few things in life compare to the feeling of finally owning your own home. Here are a few of the reasons why you should consider purchasing a home.
- You'll be building your wealth. On average, homeowners have a net worth that's 40 times greater than their renting counterparts.
- Real estate tends to increase in value over time. And making upgrades to your home can help increase the value of your property.
- There are also tax benefits that come with homeownership. For instance, you might be able to take advantage of a mortgage interest deduction. Homestead exemption provides a tax exemption up to $50,000 for permanent residents in the state of Florida.
- You have the freedom to decorate and renovate the house as you please.
- You’ll also have more privacy and peace of mind.
- Many new subdivisions have the same amenities as renting, such as a pool, gym, and parks.
Other Considerations with Owning a Home
Buying a home is a big decision that has a lasting impact on your life. Here are a few things to consider before purchasing a home:
- Being a homeowner limits your mobility in some ways. For example, you can't just decide to move to a different city for a new job and cancel a lease like you can with a rental.
- Purchasing a home requires substantial money upfront since you’ll have to save up for a down payment and consider closing costs.
- Mortgage payments are sometimes lower than rental payments even with taxes and insurance however, homeowners are often subject to HOA fees that are otherwise covered when simply renting a property.
- You are responsible for the costs of repairs, and maintenance can impact savings.
So, What’s the Verdict?
The answer to the rent vs. buy debate isn’t so cut and dry. If you’re considering buying a home, expanding your knowledge through research can help you better understand the financial preparedness and responsibilities required for homeownership and help you learn more about the purchasing process. Arming yourself through education will help you make the long-term decision that best benefits you.
If you're still unsure after weighing the pros and cons of renting and buying, it might be helpful to consult with a professional mortgage lender. At Community First Credit Union, our Mortgage Champions are committed to walking you through the entire home buying process. We'll be glad to answer any questions you might have and help you determine how much you can afford.
Contact us today to learn more about homeownership and mortgages. You can also download our home buyer’s toolkit for additional resources.