You’re ready to look for a new home but unsure if it makes more sense to rent or buy. You’re not alone! Many people struggle to make sense of the current housing market or understand how their lifestyles and future plans play into the decision. As we dig into this complicated topic, remember that there’s no perfect answer.
You’ve probably heard that it’s better to buy a home rather than rent one.
For the most part, this belief holds true. There are a few exceptions though, including:
You plan to move within a few years.
Your monthly rent is very low.
Your life expectancy is less than 15 years.
Of course, your monthly rent doesn’t get you anything other than a roof over your head for 30 days. Meanwhile, buying a home lets you build equity or wealth, meaning that your investment will most likely increase in value if you take care of it. If you’re considering renovations, you can even borrow against your projected home’s value to make the updates.
However, it’s important to realize that, as a homeowner, you’ll often spend money on items that don’t build equity, such as:
Closing costs
Interest on your mortgage
Property taxes
Homeowners insurance
Standard maintenance
Surprisingly, these expenses can add up to more than you’d spend on rent!
Still, there are two big reasons that buying a home is better than renting.
First, when you purchase a home, you secure your monthly payment for 15 or 30 years, depending on the terms of your mortgage. When you rent, you often have to pay more each year for the same space. Knowing what to anticipate when it comes to your mortgage payment helps you better budget for the future.
Second, your house gains value over time. Home appreciation, then, refers to the increase in value of your home over time. Since 1991, the average annual home price increase has been 4.3 percent according to the Federal Housing Finance Agency. However, this number has been higher in recent years: Since 2012, the average rate has been 7.7 percent.
Home appreciation in Florida has been even higher than the national average. In the first quarter of 2022, home values were up nearly 30 percent compared to the year before — the fastest rise of any state.
There are some smaller advantages to buying a home as well, including:
You can deduct your mortgage interest on your income taxes.
You get to stop making payments when your loan is paid off! Of course, you’ll still have other expenses, such as insurance, maintenance and repairs, and taxes.
When it comes to renting versus buying, either one can be right for you.
Do you plan to stay in the same city? Do you want to own your house — which will most likely be worth more — with the same or no mortgage payment? Or do you hope to experience new neighborhoods and/or cities? Do you want flexibility to break your lease rather than sell your home if you decide a different spot is a better fit? Ultimately, it’s most helpful to imagine what you want your life to be like in five, ten, or even twenty years.
Let The Urban Dog Group help you with your real estate needs. Contact Christine Elias at caerealestate@gmail.com.