Rent or buy? Rent or buy? The question pops up in our minds quite often, especially when rates are low and home values are steadily increasing. Homes can be a great investment, but they not for the faint of heart. They require a higher level of dedication than a rental: maintenance, insurance, mortgage payments. Then again, the joys of owning a home are pretty darn good. Let’s take a look at some signs that a renter should consider buying a house.
Consider buying a house when….You’re ready to build equity:
Unless you’ve involved yourself in a rent-to-own agreement, every dollar you pay in rent goes into someone else’s pocket. No matter how long you remain in your rental unit or how perfect of a tenant you are, the increasing value of the rental is not yours. On the other hand, buying a house puts the rising equity into your asset column. Think about if you purchased a home for $150,000 in 2014. Home prices increased 6.7% that year, 4.6% in 2015, and another 4.6% so far in 2016; that means you could have made between $20,000 and $30,000 in equity just for sleeping at your house. You can’t build equity in the property under a standard lease agreement.
You’re tired of rent increasing:
You are probably well aware that your landlord has the ability to raise your rent once your current lease expires unless you live in a rent-controlled municipality which are few and far between in most parts of the country. On the other hand, homeowners with fixed-rate mortgages make fixed loan payments each month, regardless of what the local real estate market does. That can give a little piece of mind as living expenses increase, job markets fluctuate, the economy shifts, you always know exactly what you need to set aside to make sure you have a roof over your head.
You’re staying a while
If you plan on staying in the same location for more than a few years, buying may be a smarter financial choice than renting. Many places buying a house is less than renting one. With mortgage rates extremely low, new homeowners can often find houses in a price range that would allow them to live for less per month that renting an apartment. Forbes reported Phoenix, AZ, Fresno, CA, Las Vegas, NV, Arlington, TX, Sacramento, CA, and Jacksonville, FL, as a few major cities that offer cheaper housing purchases than home rentals.
You want to make it home
Home-ownership is a DIYers dream. Homeowners have more control over decorating, DIY project, and home improvement choices with no one to answer to, provided you don’t break local building codes or violate homeowners’ association rules. Say hello painted walls, beautiful bathroom fixtures, updated kitchens, and customized backyards that you can really call your own. You can truly relax in an environment that reflect you rather than a place with posters and tapestries temporarily pinned to the wall.
You live in a good market
One of the best factors to determine if you should quit renting and start buying is if you live in a good market. For example, the Arizona housing market was hit extremely hard in the 200 recession. Since then, Arizona homes owners have seen a significant rebound. The Arizona Regional Multiple Listing Service (ARMLS) reports that sales were up 10 percent in 2015, the region’s existing home price climbed 9 percent, and new home construction jumped 46 percent. Likewise, pending foreclosures are down 26 percent to the lowest level since 2006, which means homeowners are having no trouble staying in their homes.
Renting also has its pros: flexibility, low maintenance costs, and smaller square footage to manage all lend themselves to a lifestyle that many find desirable. But, with the market quickly changing, many renters are ready to set down some roots, invest in an asset that is poised to grow, and settle into a place you can really call home. What’s more, you can explore the possibility of buying a house without committing right away. Mortgage companies will work to prequalify you at now cost, which means they can show you how much money they could give you based on your income and current debt. Likewise, real estate brokerages like Century 21 can give you an idea of the type of house you could get into if you were interested. Feel free to call Century 21 if you’re curious about the house buying process.