Should you trade rent for a mortgage payment?
If you’re considering making the move from renting to homeownership, but still have reservations, consider these pros and cons to help you decide. Both options have their own unique advantages — and disadvantages. Understanding what’s involved can help you make the decision that makes the most sense for you.
Renting: Pros and cons
One of the biggest pros of renting is the flexibility it offers. Renters generally have the freedom to move when and where they want, which can be a nice advantage if you need to relocate often for job, family, or other reasons. Here are three more advantages to renting:
- You’re generally not responsible for maintenance issues.
- You don’t need as much money upfront to move in as you would if you were buying a home. Usually, a month or two of rent is all that’s required when you sign a rental agreement.
- Monthly rent payments are usually less than monthly mortgage payments.
One of the biggest disadvantages to renting is that you’re not building any equity (essentially, ownership) in your home. You may also be subject to rent increases, usually at your landlord’s discretion. Depending on where you live, you may be responsible for utilities, internet, and renter’s insurance. There may also be restrictions on how much you can renovate and decorate your space, both inside and outside. And, having pets might limit your rental options or require additional fees.
Buying: Pros and cons
One of the biggest advantages to homeownership is that you’re building equity with every mortgage payment you make. And, you may be able to leverage that equity as a handy financing tool. In addition, your property value will likely increase the longer you live in your home, which generally makes this a sound investment. Here are three more advantages to homeownership:
- You can decorate or renovate your house and yard the way you like.
- The interest you pay on your mortgage may be tax-deductible (consult your tax advisor).
- Your monthly principle and interest payments will remain the same for the life of the loan if you have a fixed-rate mortgage.
For many people, the biggest drawback to buying a home is coming up with the required down payment. Homebuyers also need to pay additional upfront expenses during the home purchase, such as closing costs. Once you’re a homeowner, ongoing expenses include property taxes, homeowners insurance, home maintenance, and utilities. It can also be more of a challenge to relocate when you own, rather than rent.
Weigh your options
In general, if the price of a home you’re considering is 200 times more than the monthly rent you’re currently paying, it might make sense to continue renting. However, if homeownership is one of your goals, you can start preparing financially by working on a plan to build a down payment fund. It’s also a good idea to educate yourself on all of the necessary steps to prepare to buy a home.
Whether you’re saving for a down payment, exploring mortgage options, or looking for help with your overall financial plan, we’re here for you. Visit your local Westfield Bank branch or call 800.368.8930 to talk to a loan officer for personalized assistance.