The age old question – rent vs buy. In our area, rents are skyrocketing – and many people can purchase and pay less than renting a similiar property – by a lot.
Renting vs. buying a home: Which is best for you?
By Dawn Papandrea Posted: 11/18/16 Updated: 01/13/17
Sara Woznicki, a 25-year-old Richmond, Va., native, spent most of her young adulthood sharing rentals with two or three roommates. When she realized it was time to go out on her own, Woznicki crunched the numbers and found that a mortgage payment would be about the same amount as paying to rent.
For Woznicki, making the leap came down to mathematics and one big question: “If I liked Richmond enough to want to live here for a few more years. I realized that I did, and I was emotionally ready to buy,” she says. What also prompted her to take the leap: the investment value of becoming a homeowner. “Rather than pay over $1,000 to a landlord, I am essentially paying that to ‘future me.'”
Sometimes, the numbers work out in your favor when you upsize to a home. According to Trulia’s Rent vs. Buy Report, buying a home turns out to be 23 percent less expensive than renting in 98 out of 100 of the nation’s top 100 markets.
Crunching the numbers
So what does that mean for you? Renting versus buying is a very personal choice. But set emotion aside. “As soon as you get a mortgage, you become a real estate investor,” says Whitney Nicely, a Tennessee real estate expert, adding: “You’re building your portfolio every month, paying the principal of that house and building long-term equity.”
How can you decide if you’re financially and mentally ready? “Before you consider buying a home, speak with a mortgage banker,” says Ann Sugai-Inouye, a Chase mortgage banking retail executive. “They are the experts and can show you how much your housing expense will look like compared to your income.”
However, she points out that it’s not simply an apples-to-apples comparison between your current monthly rent and what a potential monthly mortgage payment will be. “When you’re buying a house, you do want to have some money set aside for repairs and maintenance,” says Sugai-Inouye, something renters generally don’t have to worry about.
“Financially, it makes more sense for me to rent than buy,” says Staten Island, New York resident Christine Goutmann. “Because my rent is less than a mortgage in my area, I can use my money toward a better quality of life and to travel. Plus, as a single person, it’s also nice to have a landlord to fall back on, like when your hot water keeps disappearing and it turns out you need a new water heater,” she says.