Have you been weighing the decision to continue renting or purchase a home lately? We get it! Purchasing your first home is a big decision. So what are the factors you should consider? Ultimately, the answer depends on multiple factors, including finances, long-term plans, and the local real estate market. Here are a few things to think about:

1. What can you afford and how much savings do you have?

2. How long do you plan to stay in the home?

3. Do you want stability or flexibility to move around?

4. Do you want to be responsible for repairs and maintenance to a home?

5. What are your financial, career, and family goals?

6. Is building wealth through homeownership something you want?

Looking at your answers to these questions can help you make a decision.

The first consideration in the rent vs. buy decision is often how much each will cost. If you rent a home, your monthly costs are generally fixed for the term of the lease. Your monthly rent may or may not include utilities such as electric, gas, cable or internet. Most leases require the first month’s rent, last month’s rent and a security deposit equal to one month’s rent in advance. In a market like the Twin Cities, the average price for a two-bedroom apartment is about $1,400. Most apartments require a security deposit equal to one month’s rent, as well as first and last month’s rent. So to move into a rental unit, you’re looking at around $4,200. Keep in mind, though, that landlords can in most places increase the rent as much as they like when the lease ends or sell the property you’re renting, so you may have to move a few times.

But, as with renting, buying a home can be expensive. You have a down payment, lender fees, the appraisal, and the inspection, all initial costs of homeownership. While this can seem overwhelming, there are many programs and grants to help first time home buyers. Speaking with a lender can really help you nail down exactly what you can afford and what help you can get, and we can show you how we can have the seller’s pay for some of the costs.

Looking at the two, renting has one major drawback: you don’t build equity. If you’re spending $1,400 a month on something, you should want to see a return. While yes, you have a home to live in while you’re renting, when you’re paying a mortgage your money is working for you. Depending on the market, homeownership can see a return of 3-6 percent a year. That means when it’s time to sell and move, you’re going to end up with more money in your pocket than if you had been renting the entire time. Plus, when you own, you get tax benefits. You can deduct your mortgage interest and property tax payments from your federal taxable income. 

So, should you rent or buy? The final decision is always up to you because you’re the one familiar with your financial situation. But, again, speaking with a lender can give you a great idea of where you’re at and what you really can afford. If you don’t have a lender, let us know! We have some great people we work with and would love to put you in touch.

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