Everyone wrestles with the question of whether the time is right to buy a home or just keep renting. There are many factors to consider, but our handy guide will make the decision easier.

Diving into homeownership is a big jump for just about everyone. The question is, when is the timing right for you to take the plunge? The answer to that question is, it really depends on your situation. Maybe you’re changing jobs and a change of scenery comes with it. Maybe you’re looking to settle down and start a family. Or perhaps you’re an empty nester looking to trade that big house for a smaller, more manageable space.

Everyone is at a different place in life, and the choices can be confusing. Throw in what’s happening in the economy as well as the real estate situation in whichever local housing markets you’re interested in, and the decision can seem overwhelming.

It really boils down to considering the pros and cons of renting vs buying in five key areas: Freedom, Costs/Wealth, Responsibility, Long-term Goals, Where Your Heart Leads/Feelings.

Freedom

Many people believe renting offers the ultimate in freedom. WHOA! Hold on there a minute. It’s true that renters can pretty much pull up stakes at the drop of a hat and move anyplace their hearts desire, but homeownership comes with a ton of freedom as well.

I know you’re thinking that sounds crazy, but hear me out. While you can’t easily pull up stakes the way you can if you’re renting, owning a home does allow you to do some things that aren’t really options for renters. If you own your home, you can paint the walls whatever color you like, make minor improvements to the property, or completely remodel or make major additions. Let’s see a renter try that with an apartment. I’m sure the landlord would probably not be too happy.

Of course, if you’re not sure you want to stay in an area for too long, the ability to move on with little-to-no strings attached means it probably makes sense to rent for the time being. Yes, you have to contend with your landlord’s rules, like not allowing pets for example, but that’s a small sacrifice to make, and you can always look for another rental situation that has more flexible rules that suit your lifestyle.

Costs/Wealth

It’s true that the costs to buy a home are significant. You typically need several thousand dollars for a downpayment and to cover the closing costs of the transaction. Additionally, the ongoing costs of maintenance, insurance, property taxes, etc. make buying a home seem like an expensive proposition on the surface.

However, if you dig a little deeper, homeownership is actually a kind of forced savings account/investment in your personal wealth. The equity you build while paying down your mortgage, and the increased value due to the home appreciating in the real estate market can mean huge increases in your wealth. You can tap into that savings account any time by getting a home equity line of credit (HELOC) or when you sell the property. Additionally, the interest you pay on your mortgage is tax-deductible, which is a benefit you can’t take advantage of when renting.

Plus, those expensive upfront costs that seem like a barrier to homeownership can be mitigated. There are many loan packages that require you to put down just 3% of the purchase price, and if you have good credit, you have access to lower interest rates which can mean significantly lower monthly mortgage payments. Lower payments can potentially mean hundreds of thousands of dollars in saving over the life of the loan. That means even more money in your pocket rather than your lender’s.

The downside to all this is that no matter what, a home is most likely going to be your biggest expense. That means you’ll have limited options to invest and create wealth in other areas simply because so many of your dollars are going into the investment in your home.

For renters, the upfront costs of moving into a rental property are significantly less. As a renter, you also don’t have to worry about maintaining the property, improvements, or insurance beyond the possessions you move into the rental. That means you likely have more discretionary income to put elsewhere.

This can be a fantastic opportunity to pay off other debts like college loans, credit cards, etc. These actions can also have the added benefit of helping to raise your credit score, and as you pay off that debt you can put more money into savings or other investments that will help you build a sizeable downpayment should you decide you eventually want to buy a home in the future.

The downside is that your rent payments don’t help you build equity in the property you live in, but rather you’re helping your landlord build equity because you’re paying off their mortgage each month. As long as you continue to rent, you’re helping build your landlord’s wealth instead of your own. Additionally, rent payments don’t give you any kind of tax savings the way mortgage payments do.

Responsibility

As mentioned above, as long as you’re renting, you don’t have the responsibility of maintaining the property or making needed improvements. You need do little more than honor your lease agreement, and that can be a very freeing feeling.

The money you’re not spending on repairs or remodeling costs is definitely tangible, but what about the intangible benefits of responsibility? You can absolutely learn responsibility by making your rent payments on time and being a good tenant, but the opportunity for exponential personal growth comes when you purchase your own home.

Few things help build a greater sense of responsibility than homeownership because you’re the one on the hook for your property. You’ve got significantly more skin in the game, and you’ll be exposed to trials that you’ll need to deal with and find solutions for. That sounds difficult, and it is, but it’s a good thing because it means you’ll gain significant life experience and wisdom, making you a more well-rounded person.

The downside is you don’t really have the luxury to throw caution to the wind, which can be more the case when you’re renting your home. However, everyone has to grow up at some point, and gaining personal responsibility is a valuable asset in life.

Long-term Goals

Another key area that will help you determine whether you should rent or buy is figuring out your long-term goals. Do you see yourself trying a lot of different jobs until you find what’s the right fit, or do you know exactly the career path that suits you? Do you enjoy living in different parts of the country, or do you like the idea of living in one place where you’ll become an established part of a community?

If you’re not certain of your exact career path, or you just enjoy trying new things, that may mean you’ll need to change jobs and move frequently. If you also like the experience of living in different locales and soaking up different cultures and communities, then renting your home is probably the best answer for now. You may not have the sense of certainty and solid footing homeownership brings, but you also have more options and flexibility to change course if you need to.

Living life on the move every few years probably doesn’t lend itself to being tied to a home because many of the financial benefits will be lost. Any equity or appreciation you might build will be eaten up when the home is sold due to real estate commissions and transaction fees. You should really only consider buying a home if you know you’re going to be there for approximately 4-5 years. A rent vs. buy calculator can help you determine how long it will take to hit that critical break-even point.

On the other hand, if you know your career path, you enjoy the feeling of stability and of being a pillar of your community, or you want to start a family, then buying a home is likely a better choice for you.

Homeownership means you’re more focused on certain aspects of your life, and that can be a very good thing. You’ll be pouring a lot of resources – money, time, effort – into your home, and as we noted above, that focus can pay dividends in terms of finances and personal growth. However, you won’t have the increased options to invest your resources elsewhere.

Follow Your Heart

It’s important to consider the quantifiable factors in the decision to rent or buy, but you can’t overlook your feelings and what your heart is telling you to do. As we’ve shown above, there are absolutely tangible things to consider, but life isn’t just about facts and figures. It’s also about happiness and dreams and what feels right in your gut.

Settling down when your heart just isn’t in it can be just as bad a decision as living the life of a free spirit when all you really want is to put down roots and find a little more certainty.

Every decision comes with a cost, and you’re the only one who can decide if you’re ready to pay that cost. By all means, calculate the hard numbers and analyze the financials, but don’t forget to ask yourself how you feel about whichever decision you choose to make.

And finally, just remember that Homes by AnnDavid can help you no matter what you decide. We’re Citrus County’s premier home builder and rental property manager. We’re certain to have a solution that will work for you regardless of where you are in life.