It's no secret that the majority of the younger generations are renting for longer than their elder counterparts. With an abundance of student loan debt and soaring home prices, it's no wonder why most people are turning to renting. However, as rent prices steadily increase, is it better to bite the bullet and invest in a home? The decades-long debate about renting versus buying is far from over, but here are a few things to consider to help you make the best decision for you.
Owning a home not only takes a financial commitment, but a level of maturity to recognize problems, plan for a variety of situations and maintain the household in good order. Being a homeowner is a commitment and if you travel often, work late most nights or don't have the extra savings to properly repair needed fixes, owning a home may not be the right choice for you. In situations like these, it might be best to continue renting a property where you are not responsible for lawn care, maintenance or a large mortgage.
While many people equate a mortgage payment to the price of rent, there are plenty of extra costs associated with owning a home than renting an apartment. You also need to take homeowners' insurance, property taxes, school taxes, utilities and possibly an HOA fee into consideration. In contrast to these extra costs, the wealth you'll be building up over time through equity development, good credit and property appreciation are important in establishing a sound financial future.
One of the benefits of renting is the lack of long-term commitment. Most leases are one year in length, giving you the option to easily adjust your living location for a new job, preferred area or just to get a change in scenery. When you buy a home, you are making a commitment to choosing a neighborhood, school district and location that you will be comfortable living in for several years while you build equity and recoup the cost of buying the house. Even though it can be hard to predict what your future will hold, having a rough idea of your five-year plan will help you determine whether investing in a home or continuing to rent is the best decision for you.