An Unbiased Look at the â€œRent vs. Buyâ€ Argument
According to the Wall Street Journal: â€œMost [Rent vs. Buy] calculators figure that if prices are more than 15 times annual rents, then a market favors renters; under 15 times, buyersâ€.
Unlike what many articles will lead you to believe, the decision to buy a home stems much deeper than a simple math equation. If, according to this equation, your market is favoring buying to renting this should be viewed as one of many reasons to buy a home, not THE reason.
If steadiness is important to you, owning a home is the way to go. Unlike rent a fixed rate mortgage will be the same month to month year after year. You will always know what tomorrow brings. Along the same lines, homeownership grants you control over things like decorating and pets.
If you are not sure where you will be, geographically, in the next 5 years renting may be best. The financial benefits of owning are home are typically awarded to those who stay in the home for 5+ years; so renting grants you more freedom and mobility than home ownership. Typically one can afford to rent in an area in which they could not afford to buy. For this reason renting can allow someone to live either in a nicer area or closer to the city.
If you choose to rent for the long term, the money saved (in lieu of a down payment) can be invested in other places that may have a quicker return on investment than the purchase of a home. However, renting can be beneficial to a soon to be homebuyer as well. Renting can grant you time to save money or to fix your credit score. Putting down a larger down payment or building a better credit score can save you far more money than jumping into the housing market too early.
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