When is the right time to buy and when is the right time to rent?
As a REALTOR® I would like to be able to say that a person should always buy a home instead of rent. Sadly that is not always the case. A variety of circumstances could suggest that renting is the right route to go. Here are a few:
If you are unsure you will be staying in the area for a reasonable period of time – Sometimes people are excited by the opportunities available to buy but don’t consider that they will likely be moving in a short period of time. Perhaps a job transfer is looming, or maybe a marriage with plans to relocate to your new spouse’s hometown is on the near future. Real estate like any investment has costs involved, and if you are purchasing a home with a minimal down payment, when the time comes to sell you may not have had time to build up enough equity to pay all the selling expenses.
If you have a personal bankruptcy on your credit history that has not been discharged for a number of years – lenders will lend to individuals who have declared bankruptcy, but only after the individual has shown that they have their financial picture back on track for an extended period of time.
If you are really stretching it to get your down payment and closing costs together – the dream of owning your own home can sometimes overshadow your other dreams. When you are deciding if the time is right to buy a home, consider your other dreams. Do you want to buy a new car? Do you enjoy going on vacations? Do you like to go out frequently for meals and entertainment? I am not saying you can’t do these things and buy a home, but don’t get yourself so committed to mortgage payments that you do not have money left over for the day to day things you enjoy.
Some of the advantages to buying as opposed to renting are:
You are building up equity in your property every time you make a mortgage payment. Part of each payment is applied to paying off the original amount you borrowed, with the idea that at the end of the amortization period of your mortgage you would owe nothing against your home. This is just a concept, since as a REALTOR® I hope you will move a number of times over the common 25 years amortization period.
As a long term investment, real estate has been shown to be one of the best ways to increase your investment capital. Like most investments, ones that you buy, maintain, and hold for a long period bring you the highest return on investment. Home ownership has enabled many families over time to keep investing in more expensive homes, utilizing only their initial down payment from their first home purchase. Remember, your personal residence does not attract any capitals gains tax when it is sold, unlike many other forms of investment.
Another perhaps less apparent benefit of home ownership is that studies have shown that the children of families that own homes are more likely to complete higher levels of education, more likely to vote in our federal elections, and more likely to continue the tradition of home ownership.
These are just a few of the things to consider when deciding if homeownership is the right choice for you right now.
If you are trying to decide if this is the right time for you to get into home ownership, I encourage you to call one of our sales representatives. They are all qualified to sit down with you and review your current circumstances. They will help you decide on your best course of action, and yes, they will sometimes tell you that renting is the right choice for you right now. But, they will also help you work out a plan to become a home owner, maybe not this month, but at some time in the near future. Don’t hesitate to ask for information, that’s just one of the ways in which REALTORS® help.