Should I Own Or Should I Rent?
Do I rent or do I buy? Many people struggle to find the answer to this question. And although most people will eventually decide to purchase a home, because of their financial situation, some prospective buyers might want to wait to commit. Still, owning your own house is an excellent investment, and can be instrumental in helping you reach your long-term financial goals.
To decide if now is a good time for you to buy a home, allow us to help you consider the following advantages of buying:
To decide whether it makes more sense to buy or continue renting, consider this: it is often far cheaper to own a home than to rent one. It sounds almost counter-intuitive – spending a couple hundred thousand bucks on a house should make you broke, not help you save money! Well, you may be surprised to find out that, if you do it right, you’ll wind up actually saving money rather than losing it when you buy a home.
To find out how much you can afford to spend on a home while having the same or lower monthly cost as your current rent, simply complete the following formula:
Current Monthly Rent x 200 = Purchase Price of a Home You Can Afford.
So, using this formula, if you are currently spending $750 per month on rent, you can afford to purchase a $150,000 home, which will also provide you with tax savings. Additionally, your future costs will be lower.
The most important thing to consider when contemplating the purchase of a home is not its cost now, but its cost in the future. In other words, how will your monthly payments for you home compare with monthly rent payments ten years down the line? As a lessee, you are not protected from increases in the cost of living, also known as inflation, so your landlord can increase the price of your monthly rent at his or her discretion. A reasonable forecast for annual increases in your monthly rent payments is four percent per year. Although an increase in rent from $750 to $780 per month ($30 being four percent of $750) might not sound like a whole lot, if you continue to rent year after year, it certainly adds up.
On the other hand, if you own your home, and use a fixed-rate mortgage to finance the purchase, the great majority of your housing costs are not subject to inflation. That means that you will be saving a great deal of money in the long run!
If you would like to learn more about the pros and cons of purchasing a home, please contact us.