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Should You Buy or Rent Your Home?

Questions to consider.

Mohamed Hassan, pxhere, CC0
Source: Mohamed Hassan, pxhere, CC0

One of life's major decisions is whether to own your own home or to rent. The following can help you make a decision that reflects your values and situation.

How valuable are home ownership’s benefits to you?

In that this is Psychology Today, let’s start with home ownership’s psychological benefits. There’s pride in owning rather than renting. There’s the good feeling of being able to fully customize your home to meet your needs and desires: tear out a wall, remodel the kitchen, paint the house in your favorite color scheme, or create the backyard you’ve always wanted. And there’s the security of knowing that, as long as you make your mortgage payments, there’s no landlord to evict you. Your home is yours.

Now, let’s turn to home ownership’s practical advantages.

Neighborhoods with mainly owner-occupied homes tend to be better: less-trafficked streets, quieter neighbors, less crime.

In a single-family home but not a condo, noise from neighbors will likely be lower — you have no shared walls or floors.

Schools in areas with mainly owner-occupied homes are more likely to have a student body with desirable values such as a good work ethic.

If you’re optimistic that the home you’d buy would increase in value, you will have made money without having had to work for it. Will home prices increase? No one has a crystal ball but some people bet based on real estate’s track record: Long-term, home prices have increased more than the inflation rate. But other people believe that the current and likely future economy will result in fewer people being able to afford a home and thus home prices will decline. Governmental policy in the new administration may make homeownership more affordable at the low-end but paid for by taxes of higher-income people, disproportionately homeowners, which would decrease prices of above-average-priced homes.

Everyone is different. How valuable are the aforementioned to you? For you, compared with what you’d pay in rent and how you could otherwise invest the down payment, is homeownership worth the money. For example, a $500,000 home typically requires a $100,000 down payment, $3,000 per month mortgage, $1,000 a month in property taxes, $50 in homeowner’s insurance, $200 in home and yard maintenance and repair, and the responsibility of getting that work done. That’s a total of $50,000 a year.

Depending on the rental market in your locale, that could be significantly more than the cost of renting, although rent increases are possible while an increase in fixed mortgage payment is not. Of course, the rental property would likely suffer from the disadvantages above: the possibility of eviction, restricted customization, greater risk of problems with noise from a neighbor, plus renting lacks the psychological advantages of homeownership.

How well can you afford to buy a home? Consider your future income prospects: Is your income likely to increase, stay stable, or decrease, for example, if your hours, bonus, or commission schedule were cut, or, of course, if you were terminated. Certainly, if you have a cushion of significant savings, consider that.

Along with deciding whether to marry and to have children, the decision to buy versus rent your home is one of life’s major ones. I hope that this article's questions will help you make that decision wisely.

I read this aloud on YouTube.

The other posts in this series on making major life decisions can be found here.

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