Renting or Buying – Which is Best for Your Finances?

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One of the most common questions that adults ask themselves is whether they should rent or buy the property that they’ll live in. The answer to this question will depend upon what your needs and expectations are, as well as what your current financial situation looks like.

So should you be getting ready to take out renter’s insurance from a reputable provider, or should you instead opt for homeowner’s insurance? Keep reading to learn which is better for your finances: renting or buying.

How Long Do You Plan on Being in the Area?

One of the first things that you need to consider when you are trying to choose between renting and buying your next home is how long you actually plan on staying in the area.

If you are planning on moving again soon, especially if you are planning on moving out of the area, you will end up saving money by finding an affordable place to rent, rather than putting a lot of your money into a home mortgage.

On the other hand, you could get a much better return on your investment by purchasing a home that you will be in for a few years. When you are ready to sell–provided that the house holds its value–you will get your money back and perhaps even make a profit that will prepare you for moving to an even better home.

Short-Term vs. Long-Term Costs

Another thing to consider is how much money you plan on spending in the short term and in the long run.

If you are hoping to save money here and now because you do not have a lot of money to begin with or you do not have enough money to put a down payment on a house, you are better off renting because you could probably find a rental property for less money than you would spend on a mortgage.

If, however, you have the money to put at least the minimum down payment on a house, and you are able to afford the mortgage, you are better off buying because you will actually own the property.

In essence, when you rent, you lose your money, but when you buy a house and pay a mortgage each month, you are investing in your own asset, which you can later sell.

What Is Your Income Stream Like?

If you have a volatile or unpredictable income stream, or if you are not certain how long you will be at your current job, you may be better off renting, especially if you can find a really affordable place.

But you can also buy a house even if your income isn’t always predictable, as long as you find one that is so affordable that you have enough wiggle room each month to manage your mortgage.

Once you analyze your finances and you determine what your short term and long term goals are, it should be easier to determine whether buying or renting is the right path to take.