Renting vs. buying: Which is best for you?
Sara Woznicki, 25, a native of Richmond, Virginia, has shared an apartment with two or three roommates for most of her adult life. When she realized it was time to go out on her own, Woznicki crunched the numbers and realized that the mortgage payment was roughly the same amount as the rent payment.
For Woznicki, making that leap came down to math and one big question: “If I liked Richmond enough to want to live here for a few more years. I realized I did, and I was mentally prepared to buy,” she says. Another thing that prompted her to take that step: the value of the investment in becoming a homeowner. “Instead of paying the landlord over $1,000, I was actually paying ‘future me’.”
Sometimes, the numbers work in your favor when you trade up to a larger home. According to Trulia’s Rent vs. Buy report, buying a home is 23 percent cheaper than renting in 98 of the top 100 markets in the country.
Dealing with the numbers
So what does this mean for you? The choice to rent or buy is a very personal one. But put emotions aside. “Once you get a mortgage, you become a real estate investor,” says Tennessee real estate expert Whitney Ness, who adds, “You’re building your portfolio every month, paying down the principal on that house and building long-term equity.”
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Once you get a mortgage, you become a real estate investor.
Whitney Nicely, real estate expert
How do you determine if you are financially and mentally prepared? “Consult with a mortgage banker before you consider buying a home,” says Ann Sugai-Inouye, head of retail at Chase Mortgage Bank. “They are the experts and can tell you how much your housing expenses will be compared to your income.”
However, she notes that it’s not just a like-for-like comparison between your current monthly rent and the potential monthly mortgage amount. “When you buy a house, you do want to set aside some money for repairs and maintenance,” Sugai-Inouye says, something renters don’t usually have to worry about.
“Financially, it makes more sense for me to rent than to buy,” says Staten Island, N.Y., resident Kristen Gutman. “Because my rent is lower than my mortgage in my area, I can use my money to improve my quality of life and travel. Also, as a single person, it’s nice to have a landlord you can count on, like when your hot water keeps disappearing and you end up needing a new water heater,” she said.
Take a look at some of the pros and cons of renting versus buying to help you determine what’s most important to you and what’s best for your finances:.
If you’re still on the fence, consult a mortgage professional who can help you check your finances. As for determining if you are content to rent or willing to commit to homeownership? Do some self-reflection and research so that no matter what choice you make, you know it is the best one for you.
