If you have been weighing out the pros and cons of whether to buy or rent your next home here are some questions to ask yourself in order to come up with an answer:
1. Can you afford it?
Having the money for a down payment is only the first step. Next, you need to make sure you can afford to pay your mortgage … and costs like utilities, maintenance, furniture, taxes, and inevitable surprise costs like emergency replacement of the broken furnace.
Rent if: You don’t have the money saved to buy and carry a home.
Buy if: You’ll have the cash to cover the initial transaction, plus the ongoing costs of homeownership.
2. Are you financially secure?
To be in a financial position that’s secure enough to responsibly to buy a home.
- Decent credit
- A stable income
- Moderate liabilities
- Enough cash on hand to cover down payment and closing costs
- Liquid assets as financial reserves
Rent if: You can’t check off one or more of the above bullet points, or if buying would completely wipe out your savings.
Buy if: You’re financially secure outside of your home savings.
3. What are your other financial goals?
While buying a home is a major financial accomplishment, it’s unlikely that it’s the only one you ever intend to make.
Rent if: You’re currently prioritizing other financial goals above homeownership.
Buy if: Homeownership is your primary financial goal, and you’re both aware of and comfortable with how the cost will affect your progress towards your other goals.
4. Are you willing to be the super?
This isn’t a financial question, but a lifestyle one: If the sink springs a leak, the yard needs to be mowed, the door handle breaks, who deals with it? It won’t be your landlord or super.
Rent if: You want someone else to step in when things get complicated around the house.
Buy if: You don’t mind dealing with the increased chores that come with being your own landlord.
5. Where do you see yourself in the near future?
Different experts have different estimates, but generally, it’s recommended that a homebuyer spend at least four to five years in a home to offset the costs of buying.
Rent if: You’re unsure where you’ll be in the near future.
Buy if: You expect to be in the same place for a few years and want to own your home.
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