Is It Better To Rent Or Buy a Home? Here are Three Things to Consider – It’s a new year and if you’re like many Americans in pursuit of the American Dream, then you’ve probably been sold on the idea that buying a home is the best way to create wealth. Home ownership is indeed one of the smartest ways to build wealth that will remain in the family for many generations. However, the decision to purchase a home is a financial decision that should fit with your overall financial and lifelong goals.
Watch video below: CNBC’s Landon Dowdy zeros in on tips to help you decide whether you should rent or buy a home.
Consider the following 3 Things when making your decision to buy a home vs renting a home:
- What can you afford? You should spend no more than 30% of your after-tax income on housing costs.
- How long do you plan to stay in your home? If you’re not there for at least 2 years, you may want to rent.
- Mobility. You may be at a stage in your life or your career where you want to be able to move to pursue opportunities.
For example, when considering how much you can afford, let’s assume you have a combined monthly after tax household income of $4,000. So, the monthly amount available is equal to $1,200 which is 30 % of your net income.
If you don’t plan to stay in the home for at least 2 years, then it may be a better decision to rent. In many areas, buying a home can have a smaller dent in your budget than renting. Take a look at the example below.
Trulia has a very simple to use Rent vs Buy calculator that helps individuals compare the total cost of renting with the total cost of buying. Try it out…