There is no one right answer when it comes to renting vs. buying a house.
However, it’s a huge decision as buying a house is one of the biggest investments you’ll make in your lifetime.
Therefore it’s important to consider many factors before deciding whether you should be renting vs. buying a house.
Today, we provide questions to ask yourself when determining whether renting vs. buying a house is right for you.
How Long Do I Expect to Stay in This House?
The longer you plan to stay in the house, the better off you are buying vs. renting.
This is because the process of buying and selling a home costs money as well as requires a significant amount of time and effort.
If you plan to stay less than five years, renting vs. buying a house may be more suitable for you.
Would I Be Happy If I Was Forced to Stay Longer in This House?
For example, people bought a “starter” home in 2005 with the intention to sell and buy a bigger house a few years later.
However, due to the housing crisis, they ended up stuck in homes which were worth less than they owed on their mortgages.
Housing prices are on the rise now, but there is no guarantee they will continue to rise or the rate at which they will increase.
Therefore, if you bought a house and were forced to stay in it longer than you expected due to uncontrollable circumstances would you be content?
If the answer is no, renting vs. buying a house may be better for you.
Do I have A Stable Job and Life?
If your job is not permanent or secure, you may not want to be tied to a specific location or a mortgage.
Conversely, if you have a tenured position or know you would like to raise your family in a certain city, you might consider buying a home.
How Do My Monthly Costs Compare in Renting Vs. Buying a House?
Make sure you account for all the monthly costs of owning a home including:
Regular maintenance like lawn care or snow removal
Compare these costs to the expenses you’d incur if you were renting. Note that utility costs may be higher if you buy since many rentals include water service and garage collection.
Do I have Enough Savings For a Downpayment?
Most mortgage lenders require 20 percent of your home’s purchase price as a downpayment. If you’re unable to save this amount, you would need to get private mortgage insurance, which allows you to put down as little as five percent on a loan.
The earlier you start saving for a downpayment the easier it gets to buy a house.
If you don’t have enough money put aside, you may want to consider renting while you continue to build your savings for a downpayment.
Do I have Enough Savings To Pay For Unexpected Repairs?
All houses, even new ones, sometimes need repairs.
For example, if there is a pipe leak or the water heater breaks you have to fix it immediately.
If you don’t have an emergency fund for unexpected repairs you should consider whether renting vs. buying a house may be the right choice at this time.
Will I Be Better Off Financially Investing My Money Somewhere Else?
Determine if putting all your savings towards a downpayment for a home is the right use for your money. Depending on how you invest your money, you might be better off financially renting vs. buying a house right now.
If so, you can use your discretionary funds for investments or to save for retirement.
Once you’ve asked yourself the above mentioned questions, you’ll be in a better position to decide whether renting vs. buying a house makes sense for you at this time.