To Rent or Buy - And Which is Better?

At some point in our lives we are faced with this question; is it better to rent or buy? And it all depends on the situation, the market and the timing. It can be a huge financial decision and one certainly not to take lightly. Sometimes it can be difficult to decipher the numbers on which makes more sense. Buying has more costs involved and can prove to be more complicated even though in many cases it can be far less to buy than rent. There are several factors to consider when on the fence between renting and buying. Here are just some of the major deciding factors between the two.

Home Prices:

Although not the sole factor, the home prices and market can determine if renting or buying makes more sense. By calculating initial cost of a home, potential rent for a similar home and the mortgage amount incurred each month you can get a good idea of what makes more sense financially. Of course, other factors play in to this: HOA dues, taxes, insurance and upkeep. However, if you pay yourself by paying down your mortgage each month, you are saving money in your own home verses paying for your landlord’s mortgage and gaining nothing when you move.

Length of stay:

The time you plan on staying in a home is also a crucial factor. Often times 5-10 years is a reasonable about of time before buying makes more sense than renting. If you plan on moving or relocating in a year or two, buying may not work, since you will have to sell the property and potentially lose money if the market has not increased enough to gain a profit from inflation. If you plan on staying in the home at least 5 years, buying can make a lot more sense as you will most likely have gained enough equity to afford selling the property and buying another home. Of course, frequent refinances and HELOCs can deter this factor greatly.

Read more: How has home buying changed since our parents time?

Mortgage Terms:

Mortgage terms and details are another factor to consider. If mortgage rates are low, which they are right now, you may be able to afford a larger home than if you rented for the same mortgage/rental payment a month. For instance: If you were to purchase a $300,000 home with a 3.5% rate, the monthly payment would be roughly $1347 – not including insurance. The more you put down on a home the lower the payment will be. You can adjust the length of the mortgage, certain terms and even pay down the mortgage with points to lower your payment. All of these issues can be calculated and compared to renting a similar home.

Related: Are Cash Buyers King in the Luxury Market

Additional Costs:

Smaller details such as renting costs, security deposits and first and last’s month’s rent, tax deductions, maintenance fees, closing costs, and inflation all can play a role in deciding which makes the most sense for your situation.

With all my customers, I want the very best for their financial situation. Sometimes it’s renting – sometimes it’s buying. By calculating the most common factors and the largest details of the deciding trends you can get a pretty good snapshot which makes the most sense for you. In the Palm Desert real estate market, the average and median home price is between $250,000 – $350,000 and the rental market ranges from $2000 – $3500. So you make the decision. Based on the size of the home, the cost, the rent, and your future, which option makes the most sense to you?
For more calculations on renting vs buying visit the New York Times Post here

Have more questions? Feel free to give mea call anytime with updates, answers to your renting vs. buying questions or to schedule a showing on any home for sale in the area.

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