This year, home transformed from being a hideaway from reality to becoming a workspace, fitness center, exclusive dining area and everything in between.
Expectations of home changed for many people. For example, a space that previously met your needs may no longer be accommodating. Or perhaps you discovered a newfound appreciation for your home after realizing how crucial your living space is to overall productivity, happiness and comfort.
Now that home is more important than ever, here are a few things to consider if you’re deciding between renting or buying a home.
How Long Will You Stay?
If you’re choosing between buying and renting a home, something you should ask yourself is, “Is this where I see myself living in the long-run?” If you think you found your forever spot, buying a home can be a better investment. On the other hand, the one thing you can’t change when you purchase a home is the location. If you see yourself moving to a new area within a few years, consider renting.
It’s common for prospective homeowners to compare the costs associated with buying vs. renting. We’ve simplified this process for you with our Rent vs. Own calculator. While this tool doesn’t provide the full picture of homebuying costs, it’s certainly a good place to start.
For example, a mortgage doesn’t represent all of the costs associated with purchasing a home. Remember to factor in additional costs like maintenance fees, insurance, HOA dues and property taxes.
Even if your mortgage payment is less expensive than your monthly rent, these other costs should be considered before you jump into homeownership.
What Are Your Long-Term Financial Goals?
Many people prefer owning so they can build equity and invest their money into a home that will appreciate in value over time.
Equity is the difference between the value of your home and the amount owed on your mortgage. The more you pay on your mortgage, the more your equity grows. Additionally, the higher the value of your home, the more your equity grows. If you sell your home, you could use your equity as the down payment on a future home. Or, if you’re eligible, you could refinance and potentially withdraw funds to use on other large expenses like education or home renovations.
However, it can be difficult to calculate how much your future home may be worth due to factors in the economy and housing market. Finding the annual price appreciation of your home shows an estimate of how much your property will increase in value over X amount of time. Remember to calculate the inflation rate, too, for the most accurate estimate.
Weighing the potential equity of your home while considering your other long-term, financial goals is a great way to determine if it makes sense for you to continue renting or purchase a home of your own.
There are pros and cons to both buying and renting, so take time to think about which would best fit in your lifestyle and be the most realistic for your finances. If you’re ready to take the step into homeownership but aren’t sure where to start, an Evergreen Home Loans™ loan officer can help answer your questions. Contact us to get started.