Is It Better to Rent or Buy? The New York Times
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Selling a home costs money, and if you sell too soon after buying, it may not be worth it.On the other hand, if you've found a community where you'd like to put down roots, buying may be the better option. Owning a home offers more stability and potentially more financial benefits for homebuyers who plan to live in an area for more than just a few years. The 28/36 rule refers to how much debt you can take on to still qualify for a conforming mortgage. According to the rule, you should spend 28% or less of your gross monthly income (which is the amount you earn before paying taxes) on housing. This includes your mortgage, property taxes, mortgage insurance, homeowners insurance, and HOA fees, but not costs like utility bills. Housing costs include your mortgage payments, homeowners insurance, property taxes, and HOA fees if you have an HOA.
Is renting really cheaper than owning?
The decision to rent or own depends on your financial situation. But it's also about your comfort and vision for your future. Ignore people who tell you that owning always makes more sense in the long run or that renting is throwing away money. Disregard anyone who says that buying makes more sense if your monthly mortgage payment is more cost-efficient than your monthly rent payment. Housing markets and life circumstances are too varied to make blanket statements like these. For homebuyers, the down payment is a significant cost — so much so that it’s often the biggest hurdle to homeownership.
Financial pros and cons of renting a home
When weighing buying vs. renting, it's important that you consider what works best for you. When you’ve entered the necessary information, you’ll click the "Calculate" button. The calculator will tell you the number of years it’ll take for buying to be cheaper than renting in a given scenario. Of course, this calculator doesn’t tell you the whole story since it can’t anticipate the costs of maintaining a home for long periods of time. As a homeowner, you’re responsible for all the necessary maintenance and repairs. If an appliance unexpectedly breaks, you’re the one who has to fix or replace it.
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Is it better to rent or buy right now? Advice from 3 housing experts
When the market boomed during the COVID-19 pandemic, he found himself with just enough money to buy an empty piece of land in Sun Valley for $65,000 in 2022. Like with any relationship, acting impulsively is never a smart move. So, if you just got married, graduated from college, or aren’t sure which neighborhood you want to live in, the smartest thing you can do is rent for a while. I recommend waiting at least a year—that gives you time to decide how close you want to be to the in-laws.
Affordability calculator
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You can often get a conventional mortgage with as little as 3% down. Fixing a roof, for example, might be a steep cost if you're selling a home in the short term. A 30-year fixed mortgage isn't just some "plain vanilla contract," Keys says. Instead, there are variations across mortgage lenders in the rate and origination fees they'll offer you.
Renting vs. buying a house: Pros and cons
It can even help to treat it just like a salary negotiation, informing banks what rates you were able to find elsewhere. "It sounds like really lame advice but can actually save thousands of dollars over the life of the loan," Keys says. "If you're buying for 30 years, it doesn't really matter as much," Hurwitz, a broker with Compass, says.
That said, a home purchase is a big commitment, and you likely won’t accumulate a large amount of equity right away. In fact, with closing costs, it generally takes several years to recoup your money and see any equity gains. The offers that appear on this site are from companies that compensate us. But this compensation does not influence the information we publish, or the reviews that you see on this site.
Buy or rent? Study shows renting is more affordable in the 50 largest metros
Renting and owning are different in almost every aspect of what it means to obtain a place to live. The responsibilities of renters are not the same as owners. The rule also states that you should spend a maximum of 36% of your gross monthly income on all debts, such as your mortgage, car loan payments, and student loan debt.
How much can you afford?
If that number gives you heartburn, you’ll need to look for a cheaper house or keep renting. If you look at monthly costs alone though, homeownership usually tips the scale to the pricey side because you pay for maintenance, taxes and homeowners insurance on top of your mortgage. However, there are long-term financial benefits to buying a home. Real estate is an asset that typically builds value over time and can later be sold for a profit, but it also typically improves your quality of life.
Replacing your roof could cost an additional $12,000, which may not be covered under your home insurance policy. Homeownership brings both tangible and intangible benefits. Not only do you have your own home, but you can make decisions about the look and design of the space, and you also get a sense of stability and pride of ownership. Your landlord could raise the rent or sell the property.
So I now have 28 years left on a $460,000 loan at a 4.8% mortgage rate that includes my existing home and the ADU. Over the last four years, I've made $55,780 from renting out the micro studios in my home. The money I've made has helped me buy my eldest son a $360,000 house that I'm also the co-mortgage owner of, and qualify for a loan to add an ADU to my property. He planned to spend only a few weeks here, but when the conference was over, he just stayed. A few weeks in, he drove past a downtown parking lot full of ambulances. Crammed into his car, he looked into buying one to live in.
While I don’t recommend renting as a permanent way of life, there are a few times when it’s better to rent than buy. If you’re not crazy about where you live, why would you buy a house there? And in the same vein, it doesn’t make sense to buy a house if you know you’re going to relocate for work or family reasons in the next year or two. Make sure you’re really ready to put down roots before you buy. Before you buy a home, you need to make sure your financial house is in order. Next, save an emergency fund of 3–6 months of expenses, and after that, start saving for a down payment.
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