What are some of the financial considerations when thinking about buying or renting a home?
Buying a home and taking out a mortgage might make sense if:
- You have a steady source of income and a good record of paying your bills on time. Lenders will look at your ability to repay the mortgage and how positive your credit history is when deciding if you qualify for a loan.
- Home prices where you are looking to buy are stable. One risk of buying a home is that its value could go down. If that happens, you could even end up owing more on your home loan than the property is worth.
- You are able to pay for property taxes, homeowner’s insurance, water, and other utilities which might cost more than utilities you might pay for when you're renting.
- You’re willing to stay put for a few years. Buying and selling a home are expensive processes involving lots of fees and commissions. You’ll want to stay in the home long enough to make these costs worth it. Also, if home prices aren’t stable or are declining, you might find that you can't move after just a few years because you may owe more than the house is then worth.
- You can cover the cost of repairs and maintenance. When you own the home, you’re responsible for maintenance and repairs – from small ones like a leaky faucet to major ones like replacing a roof. Be sure to build an emergency fund to cover unexpected expenses.
- The potential tax advantages make sense given your financial situation. Consult your financial or tax advisor to determine whether there are tax advantages to buying instead of renting.