Renting vs. Buying a Home: Which is Right?

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Owning a home is a dream for many Americans. But as the housing market continues to move up and down, does it make more financial sense to rent a house or get a mortgage?

Ultimately, the answer depends on multiple factors, including your finances, your long-term plans and the real estate market in your area.

Renting vs. buying a home: Calculating the costs

The first consideration in deciding whether to rent or buy is often how much each will cost:

If you rent a home, your monthly costs are generally fixed. A fixed, monthly rent rate may or may not include utilities such as electric, gas, and cable or internet. Most leases require the first month’s rent, last month’s rent and a security deposit equal to one month’s rent in advance. For an apartment that costs $1,000 per month, you’d need to pay $3,000 up front.

The good news: When you’re a tenant, your landlord is responsible for paying to fix any issues with the property, whether a leaky roof, a cranky furnace or a burst pipe.

When buying a home, most mortgage lenders require a down payment of between 5 percent and 20 percent of the home’s price. Some loans may have a lower threshold, but down payments below 20 percent will mean paying for private mortgage insurance, or PMI, which is an additional monthly expense. A mortgage calculator can give you a rough estimate of your monthly payments, including your mortgage and other expenses such as property taxes and homeowners insurance.

Keep in mind, however, that your financial responsibility doesn’t end with your monthly mortgage payment. You’ll also need to pay for maintenance and repairs, whether a few bucks to fix a leaky faucet or thousands to replace your roof.

Reasons to buy a home

Buying a home can be a great investment.

Some indications that buying may be right for you:

  • You plan to stay in the same place for more than a few years.
  • You’d be willing to rent out part or all of your home, should your plans or finances change.
  • You’re eligible for a fair mortgage, with payments you can afford.
  • You’re willing to put some “sweat equity” into a fixer-upper, allowing you to buy something more affordable, whose value you can increase with improvements over time.

Reasons to rent a home

Though owning your own home can offer a sense of security, home ownership also has its drawbacks—remember the roof replacement? Getting out of a lease is also much less of an ordeal than selling a house, so if you’re not sure where you’ll be next year, renting instead of buying can save you some headaches.

Some indications that renting may be right for you:

  • You aren’t sure how long you’ll be in the home due to work, changing family circumstances or other reasons.
  • You won’t be able to afford—or don’t want to bother with—the maintenance or repairs a house may need.
  • Your finances are likely to change soon, potentially making it difficult to keep up with mortgage payments.

For more information on apartments in Fredericksburg, VA contact Abberly at Southpoint.

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