You’re looking to move soon, and a big decision has been weighing on your mind – should I buy, or should I rent? Maybe your lease on a rental is about up and you’re ready to take on the responsibility of homeownership. Or maybe you’re already a homeowner and you’d like to shed some of the responsibilities that come along with it.
Everybody has their own personal situation, but there are advantages and disadvantages to consider when deciding which route to choose.
At The Russell Company, our team will help guide you through your decision and answer any questions along the way.
Buying a home is likely the largest purchase most people will ever make. When considering homeownership, there are many things to keep in mind, especially finances.
One-time costs when buying a home
- Down payment: If you’re looking for a home loan, many lenders require you to put down 3-20 percent as a down payment, depending on which type of loan you go with
- Closing costs: Fees associated with a mortgage, usually 2-5 percent of the loan principal. How much you pay depends on the price of the home
- Upfront costs: Funds a buyer will need to have readily available to pay during the buying process (after pending the sale, but before the final closing). These funds will need to be available, liquid funds (not charged to a credit card, draining a savings account, etc.)
- Earnest money: Ideally 1% of purchase price or $1,000 for every $100,000 that’s being purchased
- Appraisal fee: Usually $400 – $500 paid directly to your lender
- Inspection fee(s): Usually $400 – $1000, depending on the types of inspections you’re having done
- Curtain costs: Things you don’t anticipate buying once you move in, but you’ll likely need or want. Examples: curtains (ahem, aptly named costs, eh?), shower curtains, shower rods, trash cans, etc.
- Mortgage payments: Payments you will make each month towards your principal loan amount
- Property taxes: These are taxes paid on a property owned by an individual or entity. These are paid annually and calculated based off how much property is valued at
- Homeowners and hazard insurance: Insurance to protect your home. Required to qualify for a mortgage
- Private mortgage insurance (PMI): Type of mortgage insurance you may be required to pay if you have a conventional loan and put down less than 20 percent of the home’s purchase price
- Homeowners association fees: Fees paid by the owners of select residential properties. Used to maintain and improve the neighborhood
- Utilities: This includes water, electric, gas, trash, sewage, etc.
- Maintenance and repairs: Anything that can and may need to be maintained or repaired within your property
- More privacy! You don’t have to worry about a landlord showing up whenever they please
- If real estate prices are on the rise, you could walk away with a profit if you decide to sell your home
- You are able to customize your home to your liking cosmetically!
- Mortgage payments could be equal or less than monthly rent payments
- You don’t have to worry about having guests stay over or being limited to what kind of pets you can have
- More difficult to quickly relocate if needed
- Responsible for repairs, maintenance, taxes, homeowner’s insurance, etc.
- Upfront costs can be costly – down payments, closing costs
When renting, you’re usually chipping away at someone else’s mortgage. While you’re not building any equity, the responsibilities of homeownership do not fall on you.
One-time costs when renting
- Application fee: A fee charged when a potential tenant is looking to sign a rental lease
- Security deposit: Once a tenant is approved for a lease, the tenant is usually required to put down a month’s rent as a security deposit. This can be thought of as insurance in the case that the dwelling is damaged, or the tenant misses a rent payment
- Pet deposits: A fee paid upfront and monthly depending on what kind and how many pets you have
- Monthly rent: The amount of money due each month as listed in your rental agreement
- Utilities: Varies depending on your rental agreement
- Renter’s insurance: This is coverage designed to help protect a renter’s dwelling
- Not responsible for repairs and maintenance
- Can easily relocate if need be
- Upfront costs are much lower
- No homeowner’s association dues
- Can’t customize cosmetically to your liking
- You are not building equity
- Rent payments could increase. Decision left up to the landlord
Whether you decide to buy or rent, The Russell Company is here to guide you through the process step by step. Give us a call or send us a text today at (765) 497-0700.