Is Buying Right for You?
|Advantages of Renting||Advantages of Buying|
|More cash on hand each month||Building value in an asset you own
|Low or no maintenance||Opportunities to decorate and renovate|
|Flexibility to move easily||Yearly tax advantages|
|Safety from market changes||Ability to purchase an expensive asset with a comparatively small down payment|
When you’re determining whether renting or buying makes the most sense for you, keep in mind that a mortgage is a long-term commitment.
Dedicating too much income toward housing can make it hard to meet other financial obligations or save money. When people buy more home than they can comfortably afford, the result can be feeling “house poor” (a term used to describe those who spend an abnormally large proportion of their income on the costs of homeownership), thanks to mortgage payments, property taxes, insurance, maintenance and utilities.
Rules of thumb depend on who you ask, but you should generally aim to keep your housing-related costs to below the Federal Housing Administration’s required minimum of 31% of your gross income. Test your budget with different scenarios: What happens if you lose your job? If you add to your family in five years? Become disabled? Solid upfront planning can help set you up for long-term financial success.
Rent vs. Buy Calculator
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