To rent or to buy? That is the question. Though it is a parody not worthy of Shakespeare’s classic Hamlet soliloquy phrase, the underlying emotion is the same. If you have reached the proverbial cul-de-sac and are not able to decide whether to buy or to rent a home, read on to get a better perspective on both the tempting options before making your decision.
Have you saved up for the down payment?
Securing a home with as low as 5% down payment is possible in most of cases but have you really saved up for this? Though the least possible amount is 5%, banks expect home buyers bring in at least 10 – 20% of the amount as down payment. The higher the amount you tend to borrow from the bank, the higher you will have to pay in insurance premiums as the bank just passes on mortgage loan insurance costs o the buyer. The premiums would be calculated as a percentage of the loan amount depending on the down payment paid.
Willing to sacrifice the lifestyle?
Buying a home means piling another added pressure on your wallet and savings. Most probably, the down payment will blow a hole in your savings and the loan premium will eat up your income. If you rent, you pay far lesser than the premium amount and have the flexibility to move any place you want without any hassles. Getting a loan would mean fewer visits to the restaurants, night clubs, shopping and all the other indulgences you pamper yourself with.
In many cases, individuals who have lived in rented apartments in the city are unable to cope up with the lifestyle offered by suburban neighbourhoods as most home buyers look for bigger homes at affordable costs. Owning a home is great but make sure you are ready to make the move mentally before doing it physically.
Is your job stable?
A very important question to ask yourself when deciding to buy or rent is the stability of your job. When buying a home, always plan for the future by chalking out your financial goals. Loan repayment would take years and hence you would be financially tied down. If you are planning to start a business venture or go free lancing in a couple of years, you would need financial freedom. In such cases, renting an apartment is more of a logical choice than buying one. Financially, buying a home is the biggest commitment in an individual’s life and should be pursued only with a stable income plan.
Ready for the additional costs?
The closing costs that come with home buying are not accounted for in your home loan. These costs would include lawyer fees, home inspector fees, seller / buyer property tax adjustment, appraisal fees and the other renovation costs. Also, your per month costs would increase with the property maintenance and fire and loss insurance to be paid. Renting an apartment would save you from these additional costs incurred while buying.
Operating expenses
When renting repairs is an headache for the owner. Depending on the property type, you may be required to clean snow, do landscapping and some repairs which can blow an hole into the pocket. Do you have reserve fund for this? Sometimes condo boards have some special levies come up so be sure when you are buying an condo or town house which is an little bit old. If you have an budget or an penchant for handling this, then buying would be good
Buying a home is a big step in an individual’s life; don’t get burdened with unnecessary debt when you could do with renting.
