Renting vs. Buying a Home
The pros and cons of each. Which is better for you?
At some point in your life you will face the question and big decision of should you rent or buy a home. In most areas of the country including Southern Nevada, it makes financial sense to purchase your home but there are a lot of important factors to consider. Most importantly is your financial situation, can you afford to purchase a house? You must take into consideration your job stability, the current market you live in, home prices, your cash on hand, additional expenses and how long do you plan on living in the home. We will review a few of these considerations to assist you with the pros and cons of renting vs. buying a home.
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- Your Job – Is your job stable? If you are uncertain about the future of your job or if you foresee a career change in the near future it may be best to continue to rent. Your mortgage lender will want a solid work and income history and if you have an unstable job you do not want to take the chance of loosing your home if anything were to change with your employment status.
- Current Market – What is your current real estate market like? Speak to a professional Realtor regarding trends, forecasts and get their opinion on where the market will be in the near future. As Realtors we can not predict the future but an experienced agent can offer insight on the market.
- Home Prices: Can you afford a house in your market? The first step would be to get pre-approved to see what you will qualify for. The next step is to find a professional Realtor and learn about the market, what is available in your price range and start looking at homes. Sometimes buyers find what they qualify for does not suit their personal taste or location and have to re-evaluate their situation.
- Cash on Hand – In addition to your down payment you will have closing costs, inspection and appraisal fees and well as other potential costs during the home buying process. You will also have ongoing costs that come with owning a home. Property taxes, HOA fees, insurance, maintenance and unexpected miscellaneous repairs. You don’t want to purchase a home if you are living paycheck to paycheck. If you have limited funds on hand, focus on conserving cash for a future home purchase and building up your emergency fund.
- How Long you Plan on Living in the Home – It is best to buy if you plan on staying in the house long term. (over 5 years) Staying in a home for five years or longer will give you a better chance of a return on your investment. If you stay in your home for a short time and sell it, you will be looking at paying closing costs all over again as well as the biggest expense of paying commission.
To assist you with your decision making you can calculate the over all costs/savings on Realtor.com’s rent vs. buy calculator. Calculator. You will simply put in the estimated home price vs. the estimated rent and see the pros and cons of each.
Some people prefer renting, if their faucet leaks they pick up the phone and have maintenance come correct the issue. As a home owner you have to prepare for unexpected issues to arise and need cash to correct them. Home ownership is also a time investment as you may have pool maintenance, landscaping and basic upkeep.
One of the biggest benefits of home ownership is the tax deductions. Your biggest tax break is reflected in your mortgage payment you make each month, for most homeowners, the bulk of that payment goes toward interest. And all that interest is deductible, unless your loan is more than $1 million. If you’re the proud owner of a multimillion-dollar mortgaged property, the IRS will limit your deductible interest. Second and vacation homes also qualify for this deduction if you stay in the property for at least 14 days a year. If you paid points when purchasing a home you can also write that off but it must be done in the year the home was purchased and it must be your primary residence.
Interest rates are very low right now which gives many the opportunity to purchase and pay a smaller monthly payment in some cases well below what they would pay for rent. Rates as of today are 3.87% for a 30 year fixed. (10/28/15)
There are many benefits of home ownership and a few negatives and the same can be said renting. It is a decision you must make wisely as buying a house is the largest investment you will probably ever make. Buying vs. renting can be a difficult decision. Do your research, work with professionals and do not over extend yourself financially. If you would like to search for homes in the Las Vegas area visit www.findinghomesinhenderson.com. We would be happy to set up a customized search for you and answer any specific questions you may have. We look forward to speaking with you.
The Sales Team