Renting vs. Home Buying
What's the best choice for me?
Ugh, I am so lost.
Renting versus home buying has been an argument for decades. Some people stand firm on the idea that home buying saves you money in the long run. Others believe that renting is the best way to save. So, what’s the real difference between the two? Of course, the biggest difference is the “ownership” factor and the upfront costs. We’re going to dive deep into the biggest misconceptions and myths to see what’s the best choice for you.
Myth #1: “You have to put 20% down on your home mortgage”
Yes, this helps you avoid private mortgage insurance, but it is not a requirement to own a home. In fact, the average home buyer puts only a 7% down payment. Many mortgage lenders have incentives for first home buyers, and some have programs that don’t even require a down payment on a home. The trade-off? Higher monthly mortgage rates and will more than likely have to pay for mortgage insurance, which ranges 0.5%-5% of the mortgage loan per year. So, if your home is worth $350,000, you will have to pay between $175-$1,750. There are many factors that determine what you pay for your first home, so chat with an expert to learn more.
Myth #2: “Buying is better than renting”
This is a tricky one. Some financial advisors believe that buying a home saves you money in the long run, even including HOA and maintenance fees. Others believe that renting is better because you don’t have a mortgage and you have the freedom to leave after your lease is up. However, this answer is much more complex than that. Buying versus renting also varies depending upon your location. A 2018 survey suggested that buying a home in Raleigh is cheaper overtime compared to renting. Renting prices are rising year after year, and home prices are doing the same, however, this study suggests it would save you money to own a home in the long run.
What else do I need to know?
There are other factors that play into owning versus renting. One big example includes wanting to travel and move to different places frequently. If you’re a single, constantly-moving-for-your-job type of person, maybe owning a home isn’t smart just yet. If you have two kids and know where you want to raise a family, you should probably look into owning instead of renting.
Other things to keep in mind are if you’ve decided to rent, talk to the landlord. Figure out exactly what is included in your lease (will the price change over time, what is the parking arrangement, what amenities are included, etc.). We won’t dive into it too much, we’ve got another blog for what you need for your first apartment. If you’re gung-ho on purchasing a house, think about if you’re ready for a fixer upper or if you’d rather pay more for brand new construction. A big myth is that fixer uppers are cheaper, when that is not true. If you can do the work yourself, great! If you need to hire laborers and contractors, you might as well look into new homes instead.
If you are really considering renting, that’s great. If you’re really considering buying, that’s great, too! Weigh your pros and cons to see what is the best option for you and your family. P.S. when you purchase your home, give us a call to check your HVAC and plumbing systems.