Should I Rent or Should I Own Now

Posted on Nov 27, 2015


Trying to decide whether to rent or own? Let’s look at the factors to consider.

Home ownership is part of the American Dream, and helping you find a better way to your dream home is why Mike and I started Houwzer in the first place. We want you to own a home and reap the financial benefits including:

  • Return on Investment. The median sales price of existing single-family homes rose 81% from 1993 through 2013, according to the NAR, and historically home rise in value anywhere from 4% to 6% per year. And you always have the option to earn rental income on the property if you move and decide to retain ownership.
  • Tax Advantages. As a homeowner, you can deduct mortgage interest payments and property taxes. The key is to file an itemized federal tax return. Any payment of the principal cannot be deducted. Only the interest part of the loan.
  • Stable Payments. If you choose a fixed mortgage rate, your principal and interest payments remain the same for the life of the loan. But remember, you must also now account for paying property tax and insurance.

Before you go down the path to home ownership, there are both financial and nonfinancial factors that should impact your decision.

I’d like to propose some questions and considerations to help in your decision making process. Like any advice, I encourage you to form your own opinion and use this as another tool to help determine if the time is right to buy.

How long do you plan on living in the same area?

Consideration: On average, it will take about 4-5 years to recoup your investment. If there is a chance you’ll be relocating in the next five years for a job or life change, you may consider holding off on a home purchase. Your home is an illiquid assets. There’s more certainty moving into a month-to-month rental situation than trying to sell your home quickly and at the price you require.

Where is your city on the trend line in terms of number of homes sold and median sales price ?

Consideration: It’s impossible to predict exactly which way the housing market will move in the future but it’s useful to get a general sense of where the market is trending in your area. A great reference for this can be found on Trulia.com under the local info sub-tab. Simply provide your zip code in the Real Estate Overview section and you can see a trending line graph of housing sales and median prices over the last 1, 5, or 15 years.

What does your credit profile look like?

Consideration: You can request a free credit report at AnnualCreditReport.com. It’s a good idea to check out what information is shown and if any errors exist. For a fee you can get your credit score. Lenders typically require a minimum credit score of 620 or 640 and higher for government-insured loan programs. For the lowest mortgage rates you need a credit score of 740 or above.

Do You Have the Ability to Finance a Home Purchase?

Consideration: If you’re considering buying a house, your first step should be to meet with a lender to determine whether you qualify for a mortgage. You’ll also need enough saved money for the down payment at closing (20% of the price of the home) and other not so incidental costs you’ll occur along the way to purchasing your home.

Are you prepared for the upkeep and maintenance requirements?

Consideration: It’s been said that the best two days of owning a boat are the day you buy it and the day you sell it. Now granted, boat ownership and home ownership are two different species, especially as the former is a depreciating asset and the latter is (hopefully) an appreciating asset. But the point is well taken for home ownership. There are lots of ongoing daily maintenance headaches and costs associated with owning a home. Along with taking care of things like yardwork and painting, you should expect to maintain a budget for repairs and replacements of appliances, driveways, trees, windows and roof, as well as service contracts (e.g. furnace).

I’m a fan of making a pros and cons checklists. In terms of mapping out the financial factors, here is a great tool from smartasset.com that does all the calculating for you. Based on key metrics, some that are fixed and others you enter, you’ll receive a visual comparison and recommendation as to whether you should Rent or Buy. The cool thing is you can adjust the data input points to create different customized scenarios.

I hope you will soon join the other 66% of Americans who enjoy the pleasure and pride of owning their own home. But like all things in life, there is a time and a place. When you are ready, please reach out to us at Houwzer.com and we promise to make your home buying journey as enjoyable, efficient and cost effective as possible. translator directory


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