Rent vs. Buying

When you’re looking for your new place of residency, you have the tough decision of renting or buying. There are many pros and cons to buying versus renting, so how do you know what is the best decision for you to make?

Buying a home is an investment. This year predicts a strong real estate market, providing more homes at lower prices than the past few years. Interest rates are to steadily decline as well, making it seem like now is the time to buy rather than rent.

You have to look at all of the factors that come into play when buying. You have to qualify for a mortgage, have access to a down payment, and all of the costs need to be factored in. When you buy a home, there are purchase costs, yearly costs, selling costs, and lost opportunity costs. Purchase costs include the down payment and closing costs. Yearly costs are the recurring monthly or yearly expensive such as mortgage payments, community living fees, renovation costs, maintenance costs, property taxes and homeowner’s insurance. Lost opportunity costs are how much you could have made if you had invested the down payment instead of buying your home. Selling costs, for when you do decide to sell, include broker’s commission and fees as well as the remaining balance on your mortgage.

When it comes to renting, the only costs you have are initial, yearly, lost opportunity and leaving your rental. Initial costs are the rent security deposit and something the broker’s fee. Yearly costs are the monthly rent and the cost of renter’s insurance. Lost opportunity costs are what you would have had each year for both your initial costs and your yearly costs. Leaving your rental is equal to the security deposit, which is typically returned to a renter at the end of a lease.

Although the initial cost of buying is much greater than the initial cost of renting, the yearly cost of renting is higher than the yearly cost of buying. How long you stay in your home should be the determining factor in the long run. If you like having the option to move around, then renting is the easier choice. If you plan on staying where you are for more than five years, it makes more sense to buy rather than to rent.

With a growing economy and the market gaining strength, some might see it as the perfect time to buy a home. However, if you aren’t ready to stay in one place and enjoy the freedom of having the choice to move, renting might be for you. By determining what you can afford and what your individual situation is, you will be able to make a decision on whether to buy or rent.

About the Author:
Castle Rock Colorado Luxury Real Estate Agent Lori Corken is pleased to bring you this article on Renting vs. Buying. Lori mainly focuses on luxury homes in Parker Colorado and in Castle Rock. If you are interested in learning more, please check out her website today.

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