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How do I know if it’s better for me to rent or buy?


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Ah, adulting. For our parents, growing up might’ve meant getting hitched, having 2.5 kids, and buying a home with a spacious yard and white picket fence. Being a proud homeowner, after all, was part of the American Dream.

But these days, being a grown-up doesn’t necessarily mean buying a home. As many of us are putting off purchasing a place or ditching the idea entirely, the question comes to mind: should we buy or rent?

First things first: let’s look at the money side of the equation. You’ll want to follow the 25% rule: Your mortgage shouldn’t be more than 25% of your gross income. (FYI: Gross income is how much bacon you bring home before taxes and deductions are factored in.) If the mortgage rate you’re looking at goes over that, then you probably can’t afford a house right now.

The costs of homeownership don’t end there. Maintenance and repairs are an extra cost on top of your mortgage. There are also taxes, and insurance that comes with owning a home.

Ideally, you should set aside at least 1% of the value of your home. So if the value of your home is $300,000, that’s $3,000 to squirrel away to patch things up and keep your house running smoothly.

Now, let’s fold in the elbow grease factor. Having a home means not being able to give your landlord a ring should a pipe burst or black of mold is discovered in your bathroom. Are you up for the task of rolling up your sleeves and handling repairs and maintenance? Or can you afford to always hire a pro to handle it?

One approach is using a special calculator to help you weigh factors like: Where you want to live, your down payment, monthly payments, interest, and length of your loan.

Another big question to ask yourself: What does homeownership mean to me? For some, it could mean being bogged down with a massive responsibility — and 30-year debt. For others, it’s a life goal. A milestone that shows we’ve made it, and that we’ve so grown up that we can dig our heels into a physical place and settle down.

When figuring out whether renting or buying is best for you, you’ll want to look at the money factor, time factor, and what homeownership means to you and your partner. Not what it means to your mom, your friends, or co-workers, but to you.

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