Should I Rent or Buy a Home?

Renting versus Owning.

rent vs own a home

rent vs own a home

 

Renting vs buying has been a dilemma for thousands of people for many years. Of course, some people simply aren’t in a position to buy their own home, particularly in this recent economic climate when they reckon that it’s getting more and more difficult for young people to get their first foot on the property ladder without a whacking great hand out from Ma and Pa, and if Ma and Pa aren’t up to it, or Grandma and Grandpa . . . well that’s just tough.
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The plain fact is that there are some situations when it is better to rent, and there are some situations whereby you’re better off buying. If you’re only going to be in a certain area for a set amount of time (maybe a 1 year work contract) then you would probably be crazy to go to the expense of buying, plus the hassle of selling when the contract is up. If, however, you want to settle down and raise a family in your own little castle forever and ever, then maybe you should consider trying to pin down your parents for a hand-out.

Cost of Buying Your Home

  • Purchase costs – including the down payment and any typical closing costs.
  • Yearly costs – mortgage payments, insurance payments, community living fees, taxes, renovations, repairs etc. etc.
  • Lost opportunity costs – what on earth does that mean? Well, it’s the difference that you could have made if you’d invested your down payment into something else instead of a home . . . I don’t mean a sports car and a yearly vacation to Mexico, that sort of investment only has one way to go.
  • Selling costs – yep, it costs you to buy a house, and then it costs you again when you decide to sell it. Brokers fees, commissions etc.

Costs of Renting Your Home

  • Start up costs – rent, brokers fee (maybe) and security deposit.
  • Yearly costs – are only the rent and renters insurance.  Everything else is down to your landlord.
  • Leaving costs – this shouldn’t cost you anything as long as everything is left in the same order as you found it. Your security deposit should be returned when you hand back the keys.

Is It Better to Rent or Buy

A good rule of thumb is to think that if you’re planning on being in the same property for 5 years or more then buying is your best option, but if you plan on moving within that time period then renting would be the most cost effective option. You must also take into account though, that house prices do not always do what you think they’re going to do, something which has caught many people out in the most recent economic downturn. 

If we go back to the image at the top of the page you’ll see that it also depends on where you live. Some areas have extremely high property prices yet relatively low rentals, whereas other places where property is more affordable it’s by far the best option to rent.

Good luck and happy home hunting!

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