Choosing between renting and buying a home stands as a cornerstone decision that can shape your financial future. With financial stability and personal aspirations in mind, exploring these routes involve a few critical considerations.
Renting Considerations
Renting a home gives you the flexibility to move in and out without facing the added challenges of selling a home. However, tenants should keep in mind that they are not building equity and cannot later sell the property in a good real estate market.
Renters insurance tends to be cheaper than homeowners insurance. Other valuable considerations are the size and frequency of rent increases, lease renewal terms, and history of prompt and reliable maintenance. Renting may also entail conforming to lifestyle policies, such as those regarding pets, smoking, decorations, quiet hours, and subleasing.
Homeownership Considerations
Beyond the down payment, homeowners must also prepare for closing costs, inspections, appraisals, unexpected maintenance costs, and property taxes. Preparing your budget and financial plan with financial advisors can help prepare you for the big day.
The down payment is the largest up-front expense. Homebuyers who put down at least 20% can typically avoid private mortgage insurance (PMI). PMI protects lenders from default and homeowners from the mortgage balance exceeding the home value during a market downturn. It is therefore wise to avoid zero-down mortgages, which also tend to have higher interest rates, whenever possible.
Save for the Down Payment
As a general rule of thumb, consider renting if you’ll live there less than 5-7 years to avoid ownership-specific expenses. All these considerations are not exhaustive, and it is prudent to consult a financial advisor before signing the paperwork. For those interested in the service of Tulsa financial advisors to build up wealth before making the big home purchase, contact the experts at 918-492-1361.
This overview is for informational purposes only and is not a recommendation. It should not be the sole deciding factor in making an investment. Investing is a risk and, as with all risks, a positive return is not guaranteed. Past performance does not indicate future results.