How do you know when to rent vs. when to buy? There are benefits to each, according to expert Scott McGillivray. It all depends on what your goals are and which one better suits your lifestyle. Both options will cost you money, though, so be prepared.
One suggestion is to rent for one year, while also putting aside what you would be paying for a mortgage, property tax, school tax, potential home repair, etc. See how you manage without that discretionary income to give you an idea of what being a homeowner is like. An added bonus is that if you decide to buy, you already have a partial down payment set aside.
There are also online calculators to help you choose. You can enter neighborhoods, home prices, down payments, interest rates, loan terms and monthly rents, along with other options.
Another way to decide is to write a pros and cons list. Do you want to stay someplace long- or short-term? If you rent, your commitment would be reduced to monthly or possibly a couple of years, at most. Owning a home is a much larger and longer commitment.
Do you want to handle repairs and maintenance by yourself, or do you want it included? If you rent, you won’t have to do repairs but keep in mind that you are not the boss, you have a landlord. If you buy, you have the freedom to renovate and potentially increase the value of your residence. You should also consider how important it is to have a ‘personal touch.’ If you rent, there are limits to how much you can decorate. As a homeowner, you are in charge.
Where do you want to live? If a specific school district/neighborhood is enticing, being open to a rental increases your chances of living there.
Do you want to save money on the side? If you rent, you might have extra money left over to invest or save. With buying, there is often a large down payment required, but you might get a tax credit.
In short, if you’re looking to stay somewhere short-term or you’re in a temporary life position, or if interest rates are too high for a mortgage, then you should probably rent. If you’re looking for long-term financial gain or stability, then buying is the option for you. If done correctly, becoming a homeowner could be the best investment of your life.