Oct 6, 2020
Buying versus renting has been a long-standing debate, but there's no right or wrong answer. With so many blog posts, calculators, and advice articles, it can be overwhelming to figure out what the right choice is for you.
So, let’s break this complex dilemma into 5 questions for you to consider:
1. How long do you plan on living in this space?
If you plan on living in this space for a minimum of five years, it makes a lot of sense to look into homeownership. However, if you’re not ready to put down roots in the area, renting is also a good option to maintain flexibility.
2. What are the costs of buying versus renting?
If you live in an area where real estate and its associated costs — such as a down payment, closing, and moving costs — are high, it may make more sense to rent. It's important to take a look at your personal financial position to make sure you're ready for the continual responsibility of homeownership. Your personal financial circumstance will be the leading indicator in helping you make this decision.
3. Where do you want to put down roots?
The surrounding factors of the area you’re considering to rent or buy in can play a major role in your decision. If you’re looking to grow in an area, you want to ask questions about the school systems, safety, and get a sense of the community. If you prefer to explore your possibilities, you may be drawn to the non-permanent nature of renting.
4. What’s the risk?
It’s always a good idea to assess both sides of the argument and take a look at the pros and cons. Although you can build equity when buying a home, you could potentially lose money if there is a downturn in the local real estate market. Or if you sell your home sooner than you wanted, you might not be able to recoup for what you spent on closing costs or renovations. On the other hand, renting means you won’t have the opportunity to build equity like you would with homeownership. Your rent could rise and you’re typically at the mercy of the property owner on how pleasurable (or miserable) your experience is in your rental.
5. What’s your financial position?
Don't approach this decision alone. Working with a financial team that includes a financial planner, real estate agent, and mortgage loan officer can help you assess your current situation. More so, your team can help you with the savings and lifestyle strategy on both renting and buying.
At the end of the day, this decision is all about your own perspective and should be based on what makes the most sense for you and your financial situation, future plans, and lifestyle.
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