To Rent Or Not To Rent?
Deciding whether to rent a home or buy one is one of the leading questions people have when they are looking to get on the property ladder. Saving up for a mortgage can take years, and many people just don’t want to wait to have their independence in life. However many people do think that renting is wasting your money because you aren’t paying towards owning anything. If you are unsure whether renting is the best option for you, here are some things to think about.
A Home Is An Investment
The main argument which people have for saying that buying is better than renting is that buying a home is an investment. The thing is, most people will never make the most of the investment they put into a house due to the rate of inflation, meaning it doesn’t have much of a long-term return. If your basis for buying a home is the fact that it is an investment, then you are not buying a home for the right reasons.
How Much You Can Afford
When you are deciding whether to rent nice apartments near me or save or save up for a home, you need to look at how much you can afford to be spending. There are a few factors which will decide whether or not you can afford to buy or whether you should rent:
Take-home pay – this is your pay after having all taxes and retirement taken off
Debt – this can include loans, credit cards, car, student loans, etc.
Consider your priorities – if you have children to look after and pay for
Calculate your down payment amount. It might make more sense to save and wait.
Make sure that you have a decent buffer in your savings to work with and use for a deposit. You will also need to think about whether you’ll be able to afford the mortgage and bills each month comfortably.
Cost of Renting Vs. Buying
One of the primary arguments between a buying and renting is that when you buy, you own your home, but when you rent you own nothing. Buying might cost a lot more, but in the end, you will have your own house. However, it’s not as simple as that.
Your rent cost: if renting ppm is cheaper than a mortgage, you could invest the difference and earn more money. You’ll get a more significant return long term and make more money for your family.
Down payment & mortgage interest rate: when you come to buying a home you need to pay out for the deposit, land tax, interest rate and other fees. If you merely invested all of this money, you would be likely to earn money back, and this would be more valuable. Where you live: whether you should rent or buy will also depend on where you live. There will be different housing prices in different areas, so you need to make sure that you are in the right place to buy or the right place to rent.
When you look at your recurring costs with both a mortgage and with renting, you will see how much you are going to save in the long term. You might not be paying towards owning a home, but if your monthly payment is less than the equivalent mortgage, you are saving money overall which means you will be earning more money by renting than buying.
If you want to work out what your net worth is, you will need to look carefully at your assets. Your home should only cost between 20-40% of your total net worth. If you are unsure how to calculate your net worth, you need to look at your real estate, stocks, investments and other assets you own. Once you have a figure, you will see what price your home should be. The reason we look at this is that it will show you that you do not want your home to be your primary asset. Think about the risk that holds if you ever lose your home. The idea is for you to be as financially stable as you can before you think about buying a home. If you are not at that stage yet, renting can be a much better option for you.
Before you do buy a home and before you rent, you will want to save up a decent amount so that you have that safety net should anything ever go wrong. Whichever choice you make, you need to take your time with the decision and always ask for advice.