Real Estate Update: Owning vs. Renting

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Which is best? Is it better for you to rent or buy a home? Before you decide, here are some questions to ask yourself.

How long will you stay in the home? In general terms, it takes three to seven years to break even on a home. If you are thinking about buying a home and selling it in two years, it is unlikely that buying will be cheaper than renting, although it has been seen in the San Diego market recently.

Do you think of or need your home as an investment in your retirement plan? Most people are used to their homes being a store for wealth that they can liquidate in retirement as part of downsizing their lifestyle. Although we have recovered from the market, the price of your home can still fall.

Are you financially ready? Owning a home is a financial commitment that requires planning how home-ownership fits into where your life is headed. Crunch all the numbers. Principal interest, property taxes, property insurance, homeowners’ association fees and of course maintenance are part of the financial landscape.

Are you prepared for the down payment and closing costs? Down payment is the lump sum payment that funds your equity in the property. They vary and can be as low as 3% to 20% or more. Plus there are additional buyer fees such as closing costs on top of the down payment that can range from 1% to 3% of the purchase price.

Can you afford the monthly mortgage and its components? Generally a mortgage includes loan principal and interest, plus homeowners’ insurance and property taxes in one payment. If you are placing anything below 20%, add private mortgage insurance to that equation.

Are you emotionally ready? Can you handle the stress? Life-changing events can lead to stress when buying a home. From a large mortgage or loan, a change in living conditions or a change in residence to other life changes such as marriage, switching careers or having a child, home buying can be stressful.

Are you ready for commitment? Many decisions will need to be made, such as picking a real estate agent to represent your best interests, choosing your neighborhood, and maintaining your new home. Taking care of your biggest investment can be gratifying, but only if you are ready.

“When you are ready, the first step is to contact a reputable, qualified, professional, real estate agent. This is mandatory,” says Minnie Rzeslawski, a realtor at RE/MAX 24K. “By contacting an agent, it’s possible to find a less expensive home as well. Agents will have details and listings you may not have found on your own.”

It can be difficult to make a correct and viable decision on a home when you’re all on your own. Reach out to an agent who is knowledgeable, experienced and has a contract negotiating background.