Should I rent or purchase? It’s a difficult decision. First, if you have enough cash to make the necessary down payment, you’ll need to speak with a mortgage broker to find if you can qualify for a mortgage. If you can qualify, now you need to study the options. If you either do not have the necessary down payment available, or if you cannot qualify for a mortgage, your decision is simple. You’ll be renting until you can.
But if you can qualify for a mortgage, your decision is a bit more complex.
First is the emotional decision. Do I want to own my own property and be able to modify the property to the way I want? Do I want the security of owning my own home? Do I want to be responsible for all repairs and maintenance? Or do I simply want to have a place to live without those responsibilities?
Second is the financial aspects of the decision. When you own your home, you can deduct the cost of mortgage interest and real estate taxes. If you are in the 20% tax bracket for example, if your mortgage interest and real estate taxes total $20,000 for the year, you will not pay taxes on that $20,000. This will save you $4,000.
Next is the monthly cost of renting versus ownership. A recent study shows that in the 100 largest metro markets in the United States, the monthly cost of your mortgage and taxes averages 37.7% less than the monthly rent on a similar residence. In some markets the difference can be over 50% less.
Interest rates are expected to rise this year. Depending on how high the interest rates rise will affect the difference between renting and owning. However, rates would need to more than double to cause ownership and rental costs to be equal.
You should peak with your financial advisor, then with a mortgage broker to find whether you can purchase or not. If yes, speak with an experienced Realtor to help you find you dream home.