- 1 - What are your priorities?
- 2 - How will it affect your lifestyle?
- 3 - How do their prices compare?
- 4 - Can you qualify for a good mortgage deal?
Everyone needs a place to live: where you want to live
Do you want to rent or buy?
People fresh out of college or their parents’ home are suddenly faced with this difficult decision and choosing can seem like a daunting task.
It’s important to educate yourself on the many differences between renting and buying before you make your decision.
Here are the most common questions you should be asking yourself:
1 – What are your priorities?
Having a clear view of your financial priorities will let you decide whether you want to purchase or rent a property.
If your plan is to buy a home, you’re going to need to start saving up quite a bit of money. This means making financial decisions that lean towards frugalness. You have to try lowering your expenses and increasing your income as much as possible.
Taking out a mortgage is a long-term investment that requires a lot of foresight. It’s going to take a while to pay it off and you need to be sure that you can manage your finances during that time.
Renting is a bit more lax when it comes to securing finances. You only have to pay your rent once a month and if you ever decide to move out, you can do so without much hassle.
On the other hand, that rent money isn’t actually buying you anything permanent. You’re getting a place to live, but it can disappear as quickly as it appeared if the money runs dry.
2 – How will it affect your lifestyle?
Making the decision to buy or rent isn’t just affected by financial factors. You need to take into account how it will affect your lifestyle.
There are some key differences between owning a home or apartment and renting one.
For starters, there are different rules in place. A landlord might have a set of rules that they want you to follow when you’re on their property. It’s not uncommon to see people disallow smoking and pets in their apartment.
More difficult landlords can be pretty picky.
When you purchase a home, you won’t have anyone telling you how to live your life. You can have as many pets as you like. This is considered a pretty important benefit of purchasing your own property.
There are people who aren’t affected by rules in a rented apartment, so they don’t lose out on anything. If you buy a house, in a setting such as an estate, you might have to follow the homeowner’s association rules regarding things like parking and front lawns.
You should spend time researching the area you want to purchase your home in and check if they fall under the jurisdiction of a homeowner’s association.
3 – How do their prices compare?
The difference in price between renting and owning a home differ from area to area. If the city you want to live in has sky-high rent prices, taking out a mortgage starts looking like a very good idea.
On the other hand, housing prices have their own issues. When you purchase a home, you aren’t just getting a place to live. You’re investing in a property that might accrue or lose value over time.
Sometimes, the price is well worth it if you predict that it will be worth more in the foreseeable future.
Buying a home is a difficult process all on its own. You have to find the right location and set your sights on a home in that area.
However, the battle doesn’t stop there. Housing prices depend on a multitude of factors. Even when you find a home, you have to negotiate a price.
Most people don’t know the intricate details of real estate and how they are priced, which is why they often hire an experienced buyers agent to help them with the purchasing process.
Even then, some people won’t want to settle for a realistic price and your search will have to continue elsewhere. It can be a long and painstaking process, but it’s often worth the wait.
4 – Can you qualify for a good mortgage deal?
Mortgages are great in theory, but not everyone gets exactly the same deal. There are quite a few factors that banks need to consider before lending you money for a mortgage, such as the following:
- You have to have a decent income if you want to qualify for a mortgage will low rates.
- Even the terms of your mortgage change depending on how much you earn.
- Credit is another important metric that banks use before giving out loans.
In order to get the best possible mortgage deal, you’re going to need very good credit scores.
It’s not impossible to take out a mortgage even when you have awful credit, but you’ll end up paying a lot more money in for borrowing across the same timeframe.
Mortgages are pretty long-term investments. They last roughly twenty-to-thirty years, which is why it might be a good idea to improve your credit score before you consider taking out a mortgage.
Even if you spend years improving it, it’s still going to be worth the trouble. The lower interest rates that good credit offers are more than worth it.
There are quite a few important differences between buying and renting. Each one has its own pros and cons.
Most people spend a great deal of their life in one place. Not everyone has to be a nomad. This makes purchasing a home a pretty solid investment.
Starting a family or dedicating yourself to your career requires a degree of stability which owning a property can give you. Others might prefer renting for the convenience it provides.
Ultimately, it’s your choice where and how you want to live your life.