Renting isn’t always “throwing your money away”. Which is smarter: renting a home or buying a home?
Despite the cliché, renting a home isn't always "throwing your money away"; and, buying a home isn’t always "a good investment."
Some renters are better off renting for another year, and some renters should be looking to purchase immediately.
As you're trying to decide for yourself -- should I rent or should I buy -- ask yourself a few questions. The answers will point you forward.
Should I rent or should I buy?
The decision between whether to rent a home or to buy one is about more than just the monthly payment. There are benefits to homeownership, just as there are benefits with renting.
In order to determine which path is best for you, consider your answers to the questions below.
You may find that homeownership is your best way forward; or, that you're better off renting an apartment in Charleston, SC.
Is your family status changing?
For home buyers who plan to get married within the next few years, or who plan to have children, buying a home can be premature. It's too soon to know what your housing needs will be exactly.
You don’t want to be in a home that’s too small for your family’s needs and you wouldn't want to buy a home that's bigger than what you need, either.
Life rarely pans out as expected, so when you're anticipating changes in family status, it can make sense to remain a renter for a while.
How long do you want to stay?
When you buy a home, it's customary for the home seller to pay the commissions due to the real estate agent(s). Therefore, if you're already planning your next change of scenery, it's smart to consider the cost of selling of your home.
Therefore, selling your home within 5 years of purchase may result in your "profit" getting used on your agent. You may also lose tax benefits associated with owning a home for such a short period of time.
Consider renting if you plan to move or sell within 5 years of purchase.
Do you have a down payment?
Unless you qualify for a VA loan or 100% USDA loan, expect to have at least 3.5 percent of the home's sale price available for a down payment.
Making low down payments means that you're borrowing more money. And, although today's mortgage rates are below 4%, payments can be high. The more you borrow, the higher your payment.
If you don't have much to put down and don't have much to make payments, consider renting for another year.
Will buying make you "house-poor"?
There are more costs to owning a home than just your monthly mortgage payment. Different from renters, homeowners are responsible for making repairs to the home when damage occurs or appliances break.
If you've spent everything you have on buying the home, and tied up your paycheck in your mortgage, you're what's known as "house-poor" -- all of your wealth is locked up in your home.
Don't be house-poor. If you can't set aside two percent of your home's value per year for home repairs and maintenance, consider renting another year.
Rent or buy? Decide what’s right for you
For all renters considering whether to buy a home or rent for another year, the answer will be a personal one. Your lifestyle and your tolerance for risk is what's most important.
For more information on renting in Charleston, SC, contact Abberly at West Ashley.
The Mortgage Reports