When buying or renting your home, there is always a debate about which decision makes the most financial sense – so do you know when to Rent or Buy your home?
Both sides have valid arguments, so it can be hard to decide which to choose.
A common argument for buying is that building equity in a home for yourself makes more sense than paying a landlord monthly rent.
However, there are actually many financial reasons why it would make more sense to research Chicago IL home rentals if you are looking to rent in the area, due to circumstances like relocation for a job, or education.
Beyond finances, you’ll also need to ensure your social and professional lives are ready and in order before considering home ownership.
It’s crucial that you educate yourself about the different factors to consider like having the best home insurance when you’re thinking about renting vs. buying a home.
The real cost of home ownership
The cost of homeownership is higher than many first-time home buyers anticipate.
Many seem to hold the belief that buying a home makes more sense than renting.
You will hear many people say that every dollar you pay in rent is a dollar you’ll never see again, while buying a house is always a great investment.
This is not true.
Paying rent isn’t a waste of your hard-earned money.
In return for your rent payment, you are receiving shelter for you and your family, a landlord who takes care of home maintenance, and even possible amenities depending on where you’re living.
Once you buy, you’re still spending a lot of money on interest payments, taxes and other fees that aren’t necessarily helping you build equity.
At first glance, a mortgage payment might be less than your current monthly rent, but that mortgage is only a small part of your true costs.
Sometimes the costs of homeownership are as high as 50% of your mortgage payment.
Here is a list of homeownership expenses to get you started as you begin to think about buying a house.
Renting could cost less
Renting your home instead of buying could actually cost you less money, even long term.
After looking at that long list of expenses, you may realize that it the cost of renting could be lower than the cost of homeownership in your specific situation.
Many experts recommend that you only purchase a home if you know you will live there for at least five years.
If you buy and own a home for thirty years, chances are the closing costs will be more than compensated by the rise in your home’s value over those thirty years.
But if you only own the home for four years, it is more likely that your home’s value won’t have increased (or possibly even decreased) to the point that your closing costs and fees mean you’ll actually lose money on your investment.
Early payments at the beginning of your mortgage term go disproportionately to interest and don’t actually pay down the principal balance, so you’re not building equity.
This is the perfect recipe for a bad investment.
When you need to figure out whether it makes more financial sense to rent or buy, you have to compare your total rental costs to the total costs of homeownership.
Calculating whether it makes more sense to rent or buy is easier than most people realize.
We found some handy tools that helped us figure out our what our monthly payments would be based on what we could afford.
One of this tools is this helpful online mortgage calculator that not only showed us what our monthly payments would be, but also provided updated information about the housing market during the COVID-19 pandemic.
Another tool that was helpful for us was this calculator created by the New York Times. This tool takes into account the hidden costs of home ownership we mentioned earlier.
For many, this calculation will make it very clear whether renting or buying a house makes the most financial sense.
Once you’ve evaluated your financial situation, you’ll be one step closer towards making the best decision regarding whether to rent or own your home.
