Many of us today are faced with the challenge on whether to buy or rent a home. And in these trying times, it seemed tough to answer. In addition, family and friends who have limited professional knowledge swamp us with advice that are often unreliable. Remember that it is not appropriate to “ask a BUTCHER how to BAKE a loaf of bread”. While it is good to listen to them, it would still be best to keep in mind that concerns of this IMPORTANCE require an expert’s opinion. Professionals can give us surefire answers to base our judgment from.
Whoever you take advice from should consider your individual situation, have experience, and be able to prove his/her point with solid evidence. In the case of should I rent or should I buy, Russell Gray (co-author of the book Equity Happens) would say “Do the math!” In other words, everyone’s situation is unique and often times math is the solution to get an objective opinion (in this case, numbers) about what choice to make in the rent vs. own debate, at least from a financial standpoint.
Given our current circumstances, I will not claim to know which will work for you since I do not have an idea of your particular situation. Nevertheless, I have listed some points below to help you find the best option and see the difference between buying and renting. For those who do renting, we can start by computing the monthly costs, which consist of rent in addition to fees, and other utilities for payment.
For ownership expenses it’s a little trickier. You must add together more items and might need the help of professionals to determine what the expenses will be. The main expenses are commonly abbreviated with the acronym PITI. This stands for Principal (the amount of money you pay toward the principal of your loan), Interest (the amount you pay toward the interest of the loan), Taxes (property taxes you must pay), and Insurance (both property insurance and mortgage insurance, if applicable).
In addition to the PITI costs, you will still have utility expenses plus maintenance costs like lawn-care, occasional new shingles, appliance, etc. After you add everything up you will then be able to see what the monthly monetary difference is between owning and renting. Or, if you are currently renting and you can pay no more than what you are currently paying per month, you can work backwards on the ownership costs and determine what price of home you could buy. It’s important to not just look at the monthly payments, however, and also look at the long-term financial advantages.
In this case, ownership seems to be where the long-range financial rewards are. Renting a house does not guarantee a title even after years of investment. You will also notice that your rent increases as time goes by. On the other hand, the payment or main cost allotted to buying a house practically stays the same even through the years except for some such as utilities, insurance, etc. The good news is that there is a promise of equity from all the payments you have made towards the ownership of your house. In an appreciating market like ours - a wise choice can go a long way in as far as the value of appreciating our home is concerned!
Buying your own home boosts your morale and gives you more freedom in making changes with it. There is a feeling of pride here aside from the fact that you do not have to ask permission whenever you want something done like painting the walls with the color you wish for. You also derive satisfaction in terms of enjoying the benefits home ownership provides. However, your decision might have a turnabout since renting requires minimal maintenance as opposed to the other.
The decision to either buy or rent a home requires balance in your personal feelings versus financial considerations. As an example, renting saves you resources that you can use for other necessities like home appliances. Unlike when you buy a home — you still need to think of property taxes and more expenses that perhaps reduce other benefits into small or minor significance. For instance, having to paint your walls with the color you like appears negligible when you factor in the horrendous property taxes to be paid. Between financial and subjective considerations, the former outweighs the latter since numbers do not usually lie.
Conversely, this piece wants to point out two important concerns relative to renting and buying a house. One is to seek advice from the right authority to help you identify the best course of action. Next is to examine carefully both the financial and subjective considerations. The gains or benefits usually become apparent on a long term basis. Finally, it would help to bear in mind that we are in a buyer’s market where ownership is deemed favorable over renting.
