Should You Rent or Buy? Tips From All My Sons Moving of Memphis
At some point, you are going to question whether it is best for you to rent or buy. When you move to Memphis, this is a decision you’ll certainly have to decide as you begin looking at properties. We have a few questions for you to ask yourself as you decide if buying a home is the right choice for you.
Have you considered all of the expenses? The biggest mistake that future homebuyers make is comparing a month's rent to a month's mortgage payment. As an owner, there are many more costs incurred, and no one to bear the responsibility except for you. There are many additional fees you need to include to make a fair comparison: the principal interest, property taxes, property insurance, homeowners’ association fees and maintenance.
Are you prepared for the stress? People who are stressed over buying a home are not being dramatic. In fact, the Holmes and Rahe Stress Scale, a landmark stress study conducted in 1970, ranks many events that go along with buying a home in the top 43 most stressful circumstances in life. Four events are specifically home-related: change in financial state (No. 16), large mortgage or loan (No. 20), change in living conditions (No. 28) and change in residence (No. 32). Factor in stressors like getting married, having a baby, or changing jobs, and you could be stressed beyond your limits.
Housing seems to be a great investment in good times because it is usually leveraged to a great degree. With a 20 percent down payment, a price increase of just three percent turns into a 15 percent increase in the homeowner’s equity. However, in bad times, a mortgage can be a heavy burden to bear and can max you out financially.
Interest on home mortgages is deductible, which sounds good but is frequently overrated. Yes, it’s deductible. But the deductibility doesn’t offset the fact that you are paying someone interest. It’s an expense, and you are worse off because of it. If you want a big tax deduction, you could make a contribution to charity.
As a renter, your landlord pays the taxes, insurance, maintenance, and sometimes even utilities. If you buy, plan on replacing the water heater some years, the back fence other years, the roof occasionally.
Most people thinking about buying compare monthly payments to rent, which is a good starting point. However, some of that monthly payment goes to principal. It’s like saving. To put buying on a level playing field with renting, look at just the part of the monthly payment that will go to interest.
Renters should keep in mind that they do not control their housing destiny. If the landlord decides to sell the property, you’ll be looking for a new home. The landlord can also raise the rent at the end of the lease.
With these things to consider, what do you think? Is owning a home right for you? Or not right for right now?