Most of us grew up hearing adults tell us what a great investment owning a home is. Owning your own home is part of the American dream: Many people strive for it and feel a great accomplishment once they do buy their first home. Owning a home with a mortgage and especially owning a home outright is certainly a huge financial accomplishment.
But is it really always a good choice to buy a home? Are there any conditions when it is better to rent instead of purchasing a home? The answer is yes, owning your own home can be a solid investment, but it is also true that purchasing a home is not always the best plan. When deciding whether to buy or rent, potential buyers should consider multiple factors, because there are pros and cons to both buying and renting.
There are several financial benefits to renting temporarily or even long-term. If you rent, you will never have to pay property taxes. While you may purchase renter’s insurance, you won’t have to buy homeowner’s insurance, which is more expensive. Also, while owning a home can be financially beneficial, it isn’t necessarily the best way to invest your money. You could choose to invest in stocks, and with careful investing decisions, you might end up with more money than you would by simply owning a home for a long time.
If you do buy a home, you will have to take care of it if you want to be comfortable and if you want to keep your investment. You might decide to hire someone to fix issues like the roof, plumbing, or a new air conditioner. If you consider yourself handy at fixing things, then you also could choose to make the necessary changes yourself. However, if you are a person who has an incredibly busy life already or simply prefers not to tinker with household issues, then you will have to pay someone.
This is something that potential homebuyers often don’t consider: All of these issues cost money to fix if you own your own home. If you purchase a home, you will have to handle issues in some manner; if you prefer to have someone else handle most problems and also avoid additional costs, you may consider long-term renting. You also might choose a condo: Many condo associations charge association fees that cover items like snow removal, yard maintenance, and exterior maintenance on the home.
There is a general consensus that if you plan to live in your house for more than a few months or a few years, you are better off buying a home. According to MSN and the New York Times, buying becomes a better deal after five years. When you factor in realtor fees and closing costs, selling a home before three years makes it difficult to recoup those fees. Even if you sell your home after three years, you could potentially still lose money depending on the housing market. Over the past few years, many states have seen housing prices drop significantly, which is unfortunate for sellers.
On the other hand, purchasing a home in an area that realtors consider to be a buyer’s market can save you a lot of money. Owning a home can provide you the benefit of home equity and appreciation. If you can afford to purchase your home outright, then it is certainly a great investment because you won’t be paying interest. So if you really want to purchase a house, if you can get a great deal on one you like and you plan to stay in it for three years or more, this might be the perfect time for you to purchase a new home.
Some people really do enjoy the feeling and assurance that comes with knowing that something belongs to them, and owning your own home can be quite a comfort in addition to being a good investment. Also, while having a landlord to call when a problem comes up can be great, it can also make you miserable if your landlord is too controlling or too slow about fixing problems.
Rent can also go up, and assuming you choose a fixed-rate mortgage, your mortgage payment will not go up. If you like designing your own space, you also might want to buy a home, because many landlords will have specific rules about what you can do to your rental. You also can control who lives with you when, whereas many landlords will also have guidelines about sharing your space.
If you are still stuck and can’t decide if you should buy or rent your next home, consider checking out MSN‘s rent vs. buy calculator.