Renting a house versus buying a home has been a debate for centuries. Owning a home is the American Dream. Many people consider buying a starter home as an alternative to renting to prevent “throwing money away on paying rent to someone else.” It is well understood that rent covers the actual homeowner’s mortgage and it is assumed that the additional monthly rental cost is cash in the homeowner’s pocket. But, in recent years, financial analysts are beginning to debate if starter- homes are a better investment than renting. There are a few things to consider in your debate to rent versus purchase.
What is the actual cost of renting versus buying?
Typically, when people are evaluating what is worth it and what isn’t, they are seeing only the monthly mortgage or rent rate. However, there are many other factors to consider. When you are a homeowner, other expenses include property taxes, homeowners insurance, routine maintenance costs, and of course, the major unexpected expenses such as replacing a water heater or repairing a roof. On the other side, money that can be saved as a homeowner includes tax deductions and building equity. As a renter, there are hidden costs include non-refundable deposits, application and background check fees, renter’s insurance, laundry costs, and unused utilities that may be included in rent. Additional expenses may occur if you move.
It is important to honestly, and completely evaluate the actual cost of both renting and buying to compare apples to apples.
How Long do You Plan to be There?
Probably the biggest factor to consider is the length of time you intend to live somewhere. Is the town you are looking in, your foreseeable permanent home? If not, renting is the best option right away. If you are home, then the debate requires more evaluation. If you have a particular house in mind, how long would you live there? If the answer is less than five years, purchasing may not be ideal. If it is five to ten years, consider price and the other points of consideration listed here.
If the price is right and you have room to grow, the next thing to evaluate is the cost. A lot of people think that it is cheaper to purchase a home rather than pay a higher rent, but if you won’t be in the home long, you could end up spending the same amount. To purchase a home, there will be closing costs and a mortgage origination fee. On a $200,000 home, these fees average about $2,128. So, if the difference between the “extra money” you would have spent over the years on rent is significantly more, buying may be a wise option. If it isn’t, then you really aren’t throwing away any money to rent at all.
There are many online calculators that can help you decide the actual cost of renting and buying and if you can afford either. An expert real estate agent can help you better understand the ins and outs of owning a home and can answer all the questions you didn’t know you had. If you are thinking about buying a home in Zionsville, Indiana, let the experienced team at Jones Realty Group help you.
