Renting vs Buying

There is a lot of speculation around what is better- buying or renting. Depending upon what you read, you could make an argument for either. I personally think a lot of the decision has to do with where you are in your life (single, married, working, family) and the market in which you live. There are many markets where it renting is cheaper, so why buy? Especially if you aren’t ready to settle down in one spot.

Another thing to consider is how much available money you have for a down payment. The standard always used to be 20% down, but anymore you can purchase a home with 3.5% down (depending on your credit score). Unfortunately with a lower down payment, you will have to get mortgage insurance. This is typically tacked onto your monthly payment. Good news is if you get a bank mortgage- this insurance will drop off once you OWN more of the property than you OWE. If you get a government backed loan such as an FHA this insurance fee will stay on your mortgage the duration of the loan (unless you refinance).  So with a low down payment your mortgage will be higher due to the insurance, but if your payments are manageable it’s worth it. It’s always better to keep more of your cash, you never know when you might need it. A great app to help you calculate your monthly mortgage based on the home price is Zillow Mortgages. We use this app frequently when we are looking at investments to get a ball park idea.

Below is a chart outlining some of the pros and cons of renting versus buying.

Ultimately, it comes down to what you are willing to and capable of taking on. Home ownership isn’t for everyone and that’s okay- and renting may not be your cup of tea. So before you make any decisions, think about the pros and cons. I would also highly recommend doing an income and expense sheet before purchasing a home. Write down all your expenses no matter how insignificant they may seem (I included my manicures when I did mine!) This is a great way to get a very realistic idea of what you can afford and how feasible it will be.