By: Qingqing Ouyang (‘23)
A new year means a new home, and many buyers are looking to start the year fresh with finding a place to live. However, when looking for a home, buyers must consider an important question: Should I buy or loan?
Of course, both buying and renting have advantages and drawbacks, and many factors must be considered before making the decision. Cost comparisons between both also vary due to the amount of time you rent or live in a home. Other factors include location and the housing market. To figure out the price differences, you can utilize a rent vs. buy calculator or talk to a financial advisor.
First, let’s talk about renting. Renting, as we all know, is where we are paying for our time in the home. The house itself is not our property, but someone else’s, and we pay the landlord to essentially live in their house. Some benefits to renting include less paperwork, no responsibility for maintenance or financial concerns, no property tax, and the ability to build a better credit score. On the other hand, no equity is built and there are no tax benefits. Additionally, renters must follow the landlords; for example, raising rent, limited space, or even have to leave when the landlord sells the property to someone else.
Contrary to renting, there is buying, where you purchase the home and it becomes your property. Undeniably, there are drawbacks, including more money for payments, losing money to house value, and extra payments for maintenance or mortgage. Despite these drawbacks, positive components to buying a home are also considerable. These include building a better credit score and equity, tax benefits, freedom with your home, and better stability.
Before deciding on which is better, it is important to consider the following: affordability, time, future goals, location, and the question of stability. Ultimately, many factors need to be calculated in determining the best fit for you, and there could possibly be more as everyone’s financial pathway is different. Extra fees for landscaping, neighborhood payments, and more are all part of the complex planning. Contacting an advisor and using resources will help you the best in deciding your settlement in the new year.
With the current situation, people spend more time at home. The down payment of purchase is as low as 3.5% of house value, mortgage interest is historically low, some at 1.999%, along with increasing rent. All these factors make buying more favored than renting.