Renting vs. buying a home: Which is right for you?
Weighing the rent-versus-buy decision? Both have upsides and drawbacks. Ultimately, the answer depends on multiple factors, including your finances, your long-term plans and the real estate market in your area. Here are five questions to ask when deciding to rent or buy a home:
- What can you afford and how much savings do you have?
- How long do you plan to stay in the home?
- Do you want stability or flexibility to move around?
- Do you want to be responsible for repairs/maintenance?
- What are your financial, career and family goals?
Renting vs. buying a home: Calculating the costs
The first consideration in the rent vs. buy decision is often how much each will cost. If you rent a home, your monthly costs are generally fixed for the term of the lease. Your monthly rent may or may not include utilities such as electric, gas, cable or internet. Most leases require the first month’s rent, last month’s rent and a security deposit equal to one month’s rent in advance. For an apartment that costs $1,000 per month, you’d typically need $3,000 up front. Keep in mind, though, that landlords can in most places increase the rent as much as they like when the lease ends or sell the property you’re renting, so you may have to move a few times.
The good news: When you’re a tenant, your landlord is generally responsible for fixing any issues with the property, whether it’s a leaky roof, a cranky furnace or a burst pipe.
You can use Bankrate’s rent vs. buy calculator to help you crunch numbers and determine whether renting or buying option is better for you.
How much house can I afford?
When buying a home, most mortgage lenders require a down payment between 3 percent and 20 percent of the home’s price. Some loans may have a lower threshold, but down payments below 20 percent will mean paying for private mortgage insurance, or PMI, which is an additional monthly expense. You’ll also pay closing costs, which average 2 percent to 4 percent of the home’s price. A mortgage calculator can give you a rough estimate of your monthly payments, including your interest and principal, outlays and other expenses such as property taxes, homeowners insurance and, in some cases, homeowners association dues. A housing affordability calculator can help you determine how much house you can afford. But our financial responsibility doesn’t end with your monthly mortgage payment. You’ll also need to pay for utilities, maintenance, and repairs, whether it’s a few bucks to fix a leaky faucet or thousands to replace a roof.
With a strong local lender and an experienced REALTOR® at your side – together we can find your NextHome.