Renting VS. Buying

The big question many people ask is should I buy or rent a home? Our economy is consumer-driven, and our culture has become an instant gratification culture where we have to have what everyone else has. With those two things in mind, it is easy to see why so many people want to buy homes before they are ready instead of renting.

 

Is it okay to rent?

Absolutely! Renting is a step you take on the path to owning a home. Renting should not be the end game but a place where you learn to live independently, get established in a steady job, and manage a home and your finances. While you rent, you should pay off your debt, save an emergency fund of three to six months of expenses, and then save for a downpayment. You will want at least ten percent saved for a downpayment plus an additional three percent for closing costs and other expenses associated with buying a home.

 

Advantages of Renting

The most significant advantage of renting is maintenance-free living. When the furnace goes out or the drains back up, you call the landlord, and they fix the issue. There is no out-of-pocket cost for you. When you own the home, you also own the cost of repairs. That is why we suggest only buying once you are debt free and have a fully funded emergency fund.  

 

Advantages of Buying

The best advantage of buying a home is, It Is Yours! A home is the largest purchase most people will ever make, and when it is paid off, it counts toward your net worth. Most millionaires have paid for homes. Another perk is your mortgage payment can be less than a rent payment. A third advantage is while you are paying off the mortgage, the interest you pay the bank is tax deductible.  

 

Let's recap what we have discussed today.

  1.  There isn't anything wrong with renting while you get established
  2.  Renting should not be the goal
  3.  Don't buy until you are debt free and have a fully funded emergency fund
  4.  Save at least ten percent for a downpayment
  5.  Take a fifteen year fixed rate mortgage where the payment is no more than twenty-five percent of your take-home pay