More millennials are moving into the real estate market. According to a survey by Realtor.com last year, about 65 percent of people ages 25 to 34 years old said they had plans to buy in the next 3 months.
However, buying may not always be the best option. When it comes to making one of the biggest financial decisions of your life, keep these things in mind to determine whether you’re better off renting or buying.
When it makes sense to rent:
Your funds are limited. Buying a house typically requires a down payment, along with other additional costs. If you don’t have the money for those costs, renting is the best option. Use these rent-versus-buy calculators at Trulia or Bankrate.com to see which option better fits your budget.
You are unclear about your job situation. If you find yourself living paycheck to paycheck and are unsure about your employment stability, focus on conserving cash for future living expenses and building up your emergency fund. These saving techniques will prepare you for funding a home.
You have a short-term time horizon. Are you working a temporary job? Do you have significant changes planned in the future? It might make more sense to rent rather than purchasing a home at this time.
When it makes sense to buy:
You are able to cover the additional costs of owning. Make sure you are able to pay the down payment and closing costs before buying a home. Maintenance costs are also a big factor to work into your budget, since you won’t have a landlord responsible for caring for the property.
You have at least a 5-10 year plan to stay in the home. It’s best to buy when you have the “long-term” in mind. Staying in a house that you buy for five years or more means you are more likely to regain what you paid in transaction costs and generate a positive return on your investment.
Your goal is to reap the financial benefits of homeownership. Low interest rates make homeownership attractive because it decreases the amount borrowers pay on their loans. Mortgage rates are at record lows after the 2008 financial crisis. If you itemize your federal return and don’t qualify for the alternative minimum tax, you can deduct your mortgage interest and property taxes from your tax obligations. And most importantly, you will have the opportunity to build equity in your home, which just isn’t possible with a rent payment.
Whether you choose to rent or buy, let CFM insure your belongings and make sure you’re protected. Contact an agent today and gain peace of mind.
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