Families planning a move are given tons of advice by friends and family about the relative merits of renting or buying a home. The truth is that every real estate decision has its own variables, risks and opportunities. You and your family will need to take in all the facts before you can make the right decision about where to move. The state of your household’s current finances, long-term plans for a bigger family and job security are just a few of the factors that could have a big influence on whether renting or buying is the more financially sound decision. Give these factors careful consideration before you make your decision and an important investment for the future.
Buying requires a long-term plan
Financial resource Freddie Mac emphasized that a family’s financial stability is the primary factor that will determine if buying a home is a feasible plan. You’ll need a solid nest egg in place, enough to cover a five percent down payment, fees and a long list of other costs associated with putting your name on a deed. In addition to having the cash in hand to make a down payment, you’ll need paperwork that confirms how much you have saved away and where your next paycheck is coming from.
“Moving before the family gets bigger can help minimize costs.”
Finally, paying these costs should not totally exhaust your savings. Purchasing a home without a cushion for unexpected joblessness, sickness and home maintenance could put your family in dire straits down the road. Don’t forget about decorations and entertainment to fill your new home either. Your family may not enjoy living in a big new home if it’s interiors remains barren for months.
Once the finances are in place, you’ll want to sit down with your family and decide what you’re looking for over the next few years. Buying is a natural decision if you and yours is looking to settle down for at least the next four or five years. This line of thinking is especially relevant to couples expecting or planning for a child. Making the move before the family gets bigger is a smart way to minimize costs and logistics.
Renting suits families living in transition
The Huffington Post pointed out that renting may be the better option if your family is keen to move a few more times before choosing a final destination. This trend may have nothing to do with an insufficient bank account – many professions require families to move on a regular basis, sometimes making a mortgage more trouble than its worth. Other homeowners are disinterested in the hassles and expenses of ongoing home maintenance. You’ll know spreading your roots and purchasing a home will overcomplicate your current lifestyle, and this perspective will naturally factor into your decision.
Not that there are several financial scenarios that would make purchasing a home a disadvantageous idea for your family and further highlight the benefits of renting in the short term. Your application for a home loan likely won’t go far if your family is in the midst of a credit recovery, for example. Renting is also worth considering if your current monthly budget is already stretched to its limits. Moving always involves changes in monthly expenses, especially when the move requires you to reach out to new utilities, cable and Internet providers. Plus, being a homeowner always incurs more expenses than renting, even when a home’s mortgage payments and a rental property’s monthly costs are comparable.
Geography will impact your long-term costs
You’ll need to do bit of extra research if your move is taking you to a new city. Local laws have a big impact on the costs you’ll have to cover if you want to move into a new home, including whether it’s cheaper to rent a property or buy one. For instance, CNN.com noted that Chicago is an appealing climate for those looking to purchase a home. You could expect to save nearly 50 percent over the cost of renting if you and your family stayed in the home for several years. Alternatively, cities like Los Angeles with low mortgage rates are ideal spots if your goal is to save money by living in a rental home.
Remember that location within a city is also very important in deciding between whether to rent or buy. Purchasing a home in the suburbs may prove to be a smart investment over renting in the same area, but the urban sector in the same metropolis will likely see housing options that favor renters.
Extra considerations for seniors
Consumer Reports explained that senior citizens will have a few extra factors to consider when choosing between a rental agreement and a mortgage. Lifestyle is a still an important consideration, for seniors, as is their health. A spacious home may be ideal if you are looking to host friends and family on regular basis. On the other hand, you may prefer the convenience and utility of a cozy apartment.
Seniors must also sort out unique financial considerations when deciding between a rental home and a purchase. For example, Consumer Reports said that seniors living on retirement funds will have their mortgage payments taxed differently by the government. Understanding the intricacies of these tax nuances and weigh the costs should clarify whether renting or buying is the more prudent choice.