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Buying VS Renting



It’s an American dream to become a homeowner, but how do you know whether to rent or buy? Buying a home is a big commitment, not only financially, but also the length of time you plan to stay in your home. When making the decision whether to rent or buy a house you should consider these important factors.

Evaluate your Finances

When approaching the topic of money you should already have a monthly budget in place to know how you will be handling your expenses. This is an important first step for both renters and homeowners, because you want to know how much you are capable of spending each month on your living situation. If you are considering buying a home, know that every mortgage requires a down payment and has closing costs before monthly installments begin. A typical estimation for the down payment is generally between 5% to 20% of the home’s purchase price and the closing costs will be around 5%. The costs of renting a home are the initial months’ rent and the security deposit, which will be significantly less than the initial cost of purchasing a home.


Long vs. Short Term Investment

Most people that decide to rent a home typically are making a short term investment towards their living situation. What these renters might not realize is that over the span of a year they have made a substantial investment already. If you are renting a two-bedroom apartment for $1500 a month you end up paying $18,000 over a year, which is a little less than the amount an average homeowner might pay a year toward their mortgage. Homeowners are making a long-term investment with the mortgage they are committing to, but with a much greater return than renters. This return is in the equity of the house which typically appreciates in value over time. Equity is the difference between what your home is worth, and what you owe on your mortgage. If you sell your house before your mortgage is paid off, the equity is the cash you get to keep, or invest in another home.


Homeownership Allows you to Potentially Leverage a Second Income Stream

If you have extra rooms in your home, you can consider taking on a roommate. This lowers your cost of living as the rent paid to you can go toward paying down your mortgage, or helping you save money. This might be something you consider for periods of time when you are looking for that extra income. Make sure you check on zoning regulations in your community, and recognize that a roommate might not care for the house the same way you do as the owner. Factor wear and tear into your costs. If you’ve bought your house to occupy as your primary home, chances are your bank requires that you continue to “owner-occupy” it per the terms of your mortgage. Homes bought as investment properties have different approval criteria and pricing, so be up front with your lender as to your plans or you could run into difficulties down the road.


Government rules and regulations continue to change all the time regarding home loans. Loan programs change and vary from institution to institution. That is why working with the right mortgage experts can make all the difference. At Pentucket Bank , our Mortgage loan officers are experienced, reliable, and here to answer your questions and assist you with every step along the way. If you are considering buying a home send us an email or give us a call today at (987) 372-7731 to begin your home buying process.

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