If you are interested in one of the homes for sale in your area, you may be tempted to go to an open house or talk with a real estate agent. However, you should know that home buying may not necessarily be the best financial option for you. What should you consider before deciding to buy a home as opposed to renting for another year?
Your Mortgage Payment Consists of Many Costs
A mortgage payment consists of your principal payment, your interest charges and taxes. You will also have to pay for insurance as well as for any maintenance costs that may arise. Therefore, you could easily pay hundreds of dollars a month in expenses that you wouldn\’t have when you pay rent. While taxes and insurance that your landlord pays are included in your rent, you get the assurance that comes with having someone responsible for maintenance and upkeep at no extra charge.
Most Leases Only Last for a Year
The typical mortgage lasts for 30 years, which means you are responsible for making payments until you finish paying off the loan or sell the property to pay off any remaining loan balance. Most leases only last for a year, which means you aren\’t stuck making payments that you can\’t afford if you lose your job or another unexpected expense comes up.
How Much Equity Can You Build?
The biggest advantage that you have when buying a home is that you can build equity. This is the difference between how much the home is worth and how much you owe on the mortgage. Equity can be used to pay bills, used to put a down payment on another house in the future or can be generally helpful in ensuring your financial security. However, if your home doesn\’t appreciate or you aren\’t planning on staying in it for more than a couple of years, it may be better to rent as you won\’t build sufficient equity.
Do You Qualify For a Mortgage?
Before you can start looking for houses to buy, you will need to make sure that you qualify for financing. If you have a lot of debt, don\’t make a lot of money or don\’t have a down payment, you could be denied a loan. When you rent, all you need is a security deposit and the first month\’s rent payment to secure a home that you will like living in.
Whether you decide to buy or rent, the goal is to find a place that is close to everything that you need or want. Even if you do have to rent for another year, it gives you plenty of time to determine what it will take to buy your first home after it expires. If you want to learn more online.