When weighing renting vs. buying a new home, the decision can be overwhelming. It’s crucial to consider all of the benefits and drawbacks that come with these options.
Renting vs. Buying – Which Is Best?
In some circumstances, renting might be your best option. For example, perhaps you are unsure of the amount of time you will stay in one home or if work obligations will take you elsewhere soon. Renting allows you to move around more freely without the long-term financial commitments involved with buying a home.
Both long-term and short-term rentals offer flexibility. Depending on the landlord or management company, lease terms can be four months to five years. However, most standard rental or lease agreements are one year in length. Rental agreements will often feature a lease renewal option if you would like to stay longer.
If a rental is in your future, it’s crucial to have adequate funds for a deposit and first-month rent on hand to close the deal. These days, many landlords and management companies also require a clean background check, proof of employment, and a good credit score.
Now, let’s explore purchasing a home. Generally, buying a home is a longer-term commitment but it can bring back great rewards. Since it’s likely the place where you plan to live for at least the next few years, you should research the neighborhood and community, as well as your specific home’s history of maintenance and price change trends over the years. In addition, you’ll have to consider insurance costs, taxes, and the total down payment amount to determine the total cost of ownership.
Generally, people thinking about purchasing a home should plan to put at least 20% down. By doing so, you can avoid paying private mortgage insurance (PMI). PMI is a fee that protects the lender if you default on your loan. First-time homebuyers may be able to get around this by choosing an FHA or VA loan, which may have down payment assistance available.
Other Factors To Consider
It’s always a good idea to look ahead five or ten years when weighing renting vs. buying. Questions you might ask yourself include:
Are you having children or adding to your family? If so, you’ll want to consider the school system and whether the home you’re considering is large enough to raise a family in.
Are you thinking of staying in your area for a while? The longer the time frame, the more advantageous buying becomes because it allows you to save on taxes and insurance costs.
Do you want to build equity? If so, the only way to accomplish this is by purchasing a home. However, depending on the loan terms, it could take up to ten years to reach this point in the homeownership cycle.
Plan Your Next Move With Care
Renting or buying a new home is an important decision that should get weighed carefully. If you’re on the fence, remember to consider all pros and cons of each before making any decisions. If you have questions about relocating to the Colorado Springs area, don’t hesitate to contact me today!
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