To buy or to rent a home in 2016? That is the question. Unfortunately, since there are so many factors to take into account, there’s no one universal answer out there to give you. There are pros and cons to each opportunity, and as your local Kirkland mortgage company, we wanted to shed some light on the topic. We’ve broken down the reasons to choose each option, and then give you our final overall answer in the conclusion.
Why You Should Rent:
When we’re comparing upfront expenditures, renting is favored over buying. In most cases, considering the purchase of the home itself with the down payment and closing costs, renting can be more affordable, at least in the short term. If you need a place to live and don’t have decent sized cash reserves beyond making a rental deposit, renting is usually the better option.
There can be extra costs of homeownership such as property taxes, the responsibility of taking care of the yard, and fixing functional issues if anything goes wrong with the house. With renting, you don’t have to worry about that stuff or take on any of the financial burdens of home maintenance. Just call the landlord and he or she will deal with it.
When the toilet breaks in your apartment, you simply notify the landlord, and they’ll either hire someone to fix it or come down and take care of it themselves. You don’t have to be concerned with the financial burden, hiring anyone to resolve the issue, or doing it yourself. The responsibility of the property is off your shoulders. That goes for other elements as well, such as gardening, yard maintenance, and making sure the roof is well kept every few years. If disaster strikes and the home you’re renting falls apart, you just move on to a new one without much loss.
If we’re making considerations in the short term again, renting can provide more flexibility with your way of life. If you don’t plan on being in one place very long, being a renter gives you the freedom to make quick, last minute lifestyle changes.
You also have more liquidity with renting. Most homeowners put a large chunk, often the majority of their savings into their real estate purchase. In this case, a lot of your money is tied up in your investment, making it difficult to get to quickly. Renting can provide you with more flexibility and other investment options.
Why You Should Buy:
Renting is Becoming Less Affordable
According to Zillow, the median asking price of rental properties in the US is $1575 per month. Compare that to a mortgage payment on the median-priced home of $180,100 and the monthly price would be just over $850. Given those statistics, even when accounting for the costs of homeownership such as maintenance, taxes, and closing costs, it’s hard to argue in favor of renting in that situation.
Historically speaking, rent has risen 5% each year. However, when you’re buying a home, you can lock in the same monthly cost for a long period. So even if your rent would be the same price as your mortgage today, it’s likely to become more expensive in the future. Envision you’re paying the same price for your home each month for the next 30 years while other rental rates are increasing. When comparing the two options over the long term, it’s pretty favorable to buy.
Even if it is less expensive in your area, renting a house mean you’re paying for someone else’s investment each month. If you’re buying your home instead, you’re building the equity in your property and growing your wealth. You’re increasing the value of your asset every time you make a mortgage payment.
You’re also investing in your home. When you buy property, you get the pride of ownership that comes with it. Everything you work on or add to the real estate is essentially an investment. By making improvements to your way of living you’re also improving the value and condition of your home.
If you own your home, you can deduct numerous expenses related to your property from your taxes. Even the interest on your mortgage can be deductible in many cases. Considering how much we pay in taxes each year, a significant portion of your income could be going towards your investment rather than to the tax man.
If you have some savings and plan on staying in one place for the new few years, in most cases, buying is a much wiser choice for the long term. With rental rates on the rise, your future self will thank you for making the present-day decision to invest in your home purchase. If you’re looking to buy a home soon, or just have any questions, contact Sammamish Mortgage today, we’re your local Kirkland mortgage company and would love to help in any way we can.