Buying vs. Renting a Home

In general, people who are looking for a place to live have two options. They can rent or buy a place to live. To decide which option to take, people need to consider the financial and personal or emotional aspects. The following are the financial factors as well as the pros and cons of owning a home:


Examining Financial Conditions

The first thing that people need to do when they want to decide whether to buy or rent a home is to determine whether they can actually afford to buy a home. Some of the things they need to consider are their ability to prepare money for the down payment, which is usually between 5% and 20% of the property price, and the closing costs of the mortgage that is usually about 5%. In most cases, the initial costs of buying a home through a mortgage are substantially higher than the costs of renting one. Another thing to consider is the fact that when people manage to cover all the initial expenses for buying a home with a mortgage, they have only gone through half of the battle.

Getting approved for a mortgage and pay all the initial costs are not the only things that people need to think about. They also need to calculate the costs that they will have to pay to stay in their future home. According to some financial experts, the ideal monthly mortgage payment should not be more than 28% of people’s gross monthly income. To be financially safe, people’s total monthly debt payments should not be more than 36% of their gross monthly income. People who crossed these suggested limits may run into trouble because they still have many other things to pay. In the other hand, people who rent a home instead of buying one will find it easier to manage their expenses because they only have to pay fixed monthly expenditure. Even if something needs to be repaired, that will be the landlord’s problem.

Some of the solid reasons to buy a home instead of renting one are the ability to build equity, and the investment value of a home. However, there are downsides of these reasons. For example, nobody can guarantee that a home can be a good investment. We have to admit that history shows that home values tend to increase over time. But there are also some areas where home values have significantly decreased.