Homeowner or Renter — Which Is Best for You?
With many stay-at-home orders still in place, countless people continue to work from home. If you've been working out of your apartment for several months, you might be yearning for more space. Is it time to buy a house?
Maybe, maybe not. Many factors determine whether you're better off buying a home or remaining a renter. Consider these signs:
Signs you may be ready to buy:
- Your job and income are stable.
- You plan to remain in the house for at least five to seven years. That's usually how long it takes for home prices to appreciate enough for homebuyers to break even.
- You have good credit that allows you to qualify for a low-interest rate mortgage.
- You have savings to cover the upfront costs. Closing costs, for example, run 3% to 5% of the loan amount. The down payment on a conventional loan is usually 20% of the home price, but it can be less if you purchase private mortgage insurance. Use this SmartAsset calculator to figure your upfront costs.
- You can afford the ongoing housing costs, such as maintenance, homeowners insurance, and property taxes.
- You like the “forced savings” of homeownership. With each mortgage payment, you accrue equity that you can either borrow against or pocket once the house is sold.
Signs you may want to rent:
- Your job and income aren't secure.
- You like having the flexibility to pick up and move when you want.
- You have weak credit and need time to boost your credit score to qualify for a mortgage at a favorable interest rate.
- You prefer a landlord handling ongoing maintenance and repairs, instead of doing the work yourself.
- Your budget can't afford ongoing housing costs that can rise over time, such as insurance, utility bills, maintenance, property taxes, and a homeowners association fee.
- You're a very disciplined saver. Research from Florida Atlantic University found that renters can build just as much wealth as homeowners by saving and investing money that otherwise would go toward a down payment, mortgage, insurance, property taxes, and other housing costs.
Please note: The contents of this publication provided by MissionSquare Retirement is general information regarding your retirement benefits. It is not intended to provide you with or substitute for specific legal, tax, or investment advice. You may want to consult with your legal, tax, or investment advisor to review your own personal situation. Some of the products, services, or funds detailed in this publication may not be available in your plan. This document may contain information obtained from outside sources and it may reference external websites. While we believe this information to be reliable, we cannot guarantee its complete accuracy. In addition, rules and laws can change frequently.