With the housing market in a slump and apartment rates increasing, it’s easy to be hesitant about which to choose: Rent or Buy. More and more apartment residents are thinking of ‘taking the plunge’ so to speak. In fact, very close friends of mine even went as far as speaking with a realtor and looking at houses in their area. They were able to find some that would allow them to pay the same monthly rent as the two bedroom apartment they are currently renting. So why didn’t they decide to jump?
Simple, they weren’t ready for the commitment. The upfront financial burden that comes with purchasing a home was more than they thought and the constant upkeep and maintenance of being a homeowner was a scary prospect. They also weren’t sure where they would be in five years, which would make a permanent residence here pointless.
1. The Upfront Financial Burden
It’s no secret that purchasing a home is a costly decision. Not only are you signing a loan amount for the selling price of the house, but you are also faced with closing costs which consist of lawyer fees, loan officer fees, application processing fees, taxes, etc. That initial cost can be between five to seven percent of the selling price!! If you don’t have that money saved up, be weary of lenders lending out ridiculous amounts of money you may not be able to afford. Or really great ‘no money down’ deals that have hidden clauses in the fine print! This is a main reason why the housing market has plummeted.
2. Upkeep & Maintenance of Homeownership
The comfort of living in an apartment-calling a landlord or management company to fix whatever is wrong with your place-is long gone when you sign on that dotted line of homeownership! Once you become a home owner you are responsible for locating-paying for maintenance workers in addition to your monthly mortgage payment. So if you are uncomfortable with the idea of having to pay additional money to fix any problems, then you may want to stay somewhere where help is just a phone call away and there are no extra fees to have it done!
3. Location in 5 years??
Typically, renting over homeownership has an advantage during the first five years a person purchases a home. Because a good portion of monthly payments do consist primarily of interest on a mortgage, whereas renters just pay to have shelter over their head. If you don’t know where you will be living in five years (or sooner than that), then you may not want to purchase a home. After five years of owning a home is when it becomes beneficial because you are paying down your investment.
So what does this mean? For current renters, it means you should really think about your options. Yes, the housing market may be in a slump and this is the best time to purchase a home; however, you need to make sure you are ready to take on this step. Weigh all the factors and look before you leap!