If you need to move with your partner or are about to start a job in a new area, you may know how challenging it can be to find the right place to live. Even more challenging is finding a place that will fit your budget.
You might not be sure whether it’s cheaper to rent or buy. Some sources would argue that it’s become more economical to rent than buy. But in many cases, it depends on a variety of factors.
Location, Location, Location
One factor that should weigh into your decision is location, as high property taxes and interest rates in some parts of the U.S. could make buying a home more expensive. In many areas, house prices are rising far faster than people’s job wages.
According to CNBC, it was cheaper to rent a home than buy in 65% of the nation’s counties in 2018. The cost of rentals is also increasing, but some people find that the down-payments and interest rates of home-buying isn’t worth the investment.
If you move to the East or the West Coast, you’ll probably find that renting is more economical than buying. San Francisco, for example, has such high home prices and taxes that renting is the better choice for people on a tighter budget. More reasonable places to buy include areas in the Northeast and Midwest.
Look at Prices
Investing in a mortgage on a $200,000 house today is often just as, if not more, expensive than paying a monthly rent. This is close to the current median home price in the U.S., but there are also plenty of homes out there for less that could be worth your time if the mortgage rate is reasonable. For example, a $150,000 house with a 3.9% 30-year mortgage rate is a little over $850 a month, while the average rental costs over $1,000 a month.
Although upfront prices are important, you’ll also likely need to look into other potential home expenses and long-term factors. The advantage of buying a home is having a fixed mortgage, while a landlord or landlady could raise your rental payment at any time. Buying a home offers you the benefits of home equity and tax deductions while potentially increasing in value.
It’s important to note that you’ll have to pay for maintenance and home repairs if you own the property. With a rental, you can avoid that hassle. If you factor in maintenance with a mortgage and property taxes, you could still find yourself paying more than you would on a standard rental.
Overall, prices are shifting in favor of renting over buying in many places across the country. Before you make your decision, you can compare prices in your area and do long-term estimates of the pros and cons of each option. Planning ahead will help you make the financial investment that suits you best.
~Here’s to Your Success!
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