It’s a common question: Should I rent or buy?
That’s often a hard question to answer because it depends on a number of variables that factor in to the most expensive purchase of your life.
It’s true that renting seems cheaper up front. You pay no property taxes and your landlord, not you, must maintain and repair the building, which can be costly. However, after 30 years you won’t own your home. If you’ve made all your mortgage payments instead of rental payments all those years, your house is yours, free and clear.
Two of the most important factors in whether to rent or buy are your income and how long you plan to live in your house. If your income is sporadic you might want to hold off on purchasing a home until you have a steady income. Housing experts advise that your total housing costs, including mortgage, property taxes, mortgage insurance and homeowners insurance, should be no more than 30 percent of your gross (pre-tax) monthly income.
You should also have some extra money saved as a cushion for unexpected home-related expenses, such as repairs. Additionally, you’ll likely need to pay 20 percent cash down payment of the home’s cost.
If your potential mortgage is less than 20 percent more than your rent, it’s cheaper to buy. This also depends, of course, on the housing market where you live. In an area where homes are more expensive it will take longer to recoup your investment in buying a home. If you plan on moving within five years, it makes more sense to rent, say housing experts, but if you plan to stay in your house longer, then buying makes more sense. You’ll have substantial equity and will likely recoup your investment when you do sell; even more, the longer you remain in your home.