Advice For Renters – Should I Rent or Buy?
Because the housing market continues to be a buyer’s market, it’s tempting for buyers to want to purchase a home instead of paying rent, but in some situations buying may not be the smartest option. Homeowners can claim tax benefits by writing off mortgage interest and property taxes but they may also have to take into account hidden expenses of home ownership such as Home Owner’s Association dues and home repair costs. Additionally, some expenses such as trash collection and water services that are currently included in rental costs will have to be budgeted for as a homeowner. The best way to determine if homeownership is in the cards for you is to use a mortgage calculator. This handy tool will help you determine if now is the best time for the purchase of a home.
Renting Might Be Your Best Bet
Clearly, owning a home is part of The American Dream, but the benefits of renting are clearer than ever after the mortgage meltdown. Renting assumes less risk and responsibility and may not be the right choice for you at this time in your life. (See “Should I Rent or Buy?”) Renters don’t assume liability for costly home repairs such as new roofs or plumbing issues. They also don’t have to pay for many of the monthly bills such as water and trash or Home Owner’s Association dues.
If your job situation is unstable or you may be relocating, renting may yield more benefits because you won’t have to worry about selling your home in a saturated, sluggish market. In most parts of the country, and in today’s weak housing market, you’ll likely not be able to recoup your costs for several years in order to make a profit on a home.
Instead of purchasing a home, you should take this time to pay off debts and save for a down payment. Work on raising your credit score by paying bills on time and by obtaining steady employment so when the
time is right for you to jump into the housing market you’ll have lots of options available to you.
Rent-To-Own: The Unconventional Road to Ownership
Prospective buyers with less-than-stellar odds in their favor – such as bad credit or no money to put down – may find that a rent-to-own option is a way for them to get a foot in the door of this affordable housing market.
While rent-to-own may allow you to get your foot in the door, it’s likely that you’ll enter through the back door. There are consequences and risks associated with this unconventional approach. There are a multitude of websites claiming they can arrange for a rent-to-own situation. Be sure to check them out and make sure their claims are legitimate. Next, take any contracts drawn up for you to a real estate attorney to review. Typically a contract states that you pay a rental fee, plus an additional fee that will become your down payment at the end of the contract in several years. At that time you can purchase the home for an agreed-upon amount. Be sure you understand all of the fees and what they go towards before you sign on the dotted line. Additionally, be sure you can afford to make these payments and what the consequences are at the end of the contract if you choose to not purchase the home. Also, during the period that you are renting, you will not be entitled to the tax benefits of home ownership even though you’re paying higher premiums.
Other places to find information on this topic:
- What the Experts Are Saying, Home Prices Must Fall far To Be In Sync With Rents, (Wall Street Journal, Jan, 2008).
- Should you buy a home in today’s market, (Real Estates ABC, May 2007).
- Now that Housing Has Soured, Renters are glad they didn’t buy, (Yahoo Finance, Nov. 2007).
- The buy vs. rent decision, (Yahoo Finance, 2007).
- Is it Better to Buy or Rent- calculator, (New York Times, Apr. 2007).
- Rental and Homeowner vacancy Rates for the US:1995 to 2007, (U.S. Census Bureau, Oct. 2007).
- To Rent or to Buy, (Real Estate Finance: Smart Money.com, July 2007).
- Rents inflated by soft-owner occupied market, (Realty Times, Oct. 2007).
- How Much of a Mortgage Can I Afford?, (REALTOR(R) Magazine Online).
- Renting or buying a home-advantages and disadvantages, (HBIC.com ).
- Rent vs Buy calculator, (Move.com,).
- (Source: National Association of Realtors website: realtor.org)
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@Mike Harmon
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