Making the choice between buying or renting a house can be a major decision, especially financially. The outcome depends on many things, including your future, finances, and lifestyle. If you plan to have children in the future, then you may want to factor that into your home buying decision, or you may want to stop looking at that $700,000 home if your budget is $300,000.
There can be so many other factors to consider, so we have curated a list of the top 7 things to think about when choosing between buying or renting your home. You want to be secure financially, and you want to make sure that you’re going to be able to sustain the monthly payments and maintain the home.
To help you decide what is best for you, here are 6 potential costs of both choices, as well as pros and cons of owning versus renting.
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Upfront costs
Owning: A down payment is the first step towards owning a home. Other costs, such as a home appraisal, homeowners insurance, closing costs and moving expenses are extra and necessary.
Renting: The costs are lower and usually begin with an application fee, a security deposit, first and sometimes last month’s rent. There are also moving expenses and, possibly, a broker’s fee.
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Recurring Costs
Owning: There are mortgage payments, homeowners association fees if the home is in a community regulated by a homeowners association, and possibly, private mortgage insurance (PMI). PMI should not be confused with homeowners insurance but is a requirement for certain loan types and when the homebuyer pays less than a required 20% down payment.
Renting: There are monthly rental payments, renters insurance, parking fees, if applicable, utilities (some utility costs may be included in the rent), and laundry fees.
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Maintenance
Owning: Owning offers the freedom to personalize and renovate the property. In many community associations, fees go toward exterior maintenance, including snow removal and lawn care.
Renting: There’s no responsibility for outside maintenance. Renters are responsible for minor issues, such as replacing filters in heating or cooling systems. The landlord bears most of the responsibility for making repairs.
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Lifestyle
Owning: Stable housing, sense of community, privacy, extra indoor and outdoor space, access to amenities such as swimming pools and clubhouses, at some community associations.
Renting: Renters have the flexibility to move when their lease is up.
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Equity
Owning: A home typically increases in value, builds equity and provides a retirement nest egg for the future. When you buy a house, plan on staying in it for at least five years to recoup the initial costs of the purchase.
Renting: No equity.
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Tax Advantages
Owning: Homeowners may be able to deduct the cost of mortgage interest, property taxes and points you pay to secure a loan. (Of course, check with your tax advisor.)
Renting: Some states offer tax credit programs for renters, mostly aimed at low-income or elderly residents.
This article was curated from Chase.com. Read the original article here.
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