To rent or to buy is a tough decision, and weighing the pros and cons to each should not be taken lightly. Here are some of the most common factors we see come into play when we are helping renters make a decision if buying is right for them.
What Renters Should Know Before Buying
1. You may not save money in the long-term
Most people may decide to buy a home so they can stop “throwing away” money on rent. They want to see their monthly bills going toward their net worth. However, there’s no guarantee that buying a home will be in your best interest financially.
In a perfect world, your property would appreciate in value each year which in turn increases your equity. You would then make a profit when you decide to sell your home. Unfortunately, property values can sometimes depreciate. You could end up owing more than you paid for the house if the market takes a turn for the worse.
2. Your utility bill may increase
The amount you pay for electricity heavily depends on the size of the property. Therefore, if you’re moving from a one-bedroom apartment to a single-family home, you could end up paying an extra $20-$30 in utilities every month. You’ll also have to pay for water and sanitation, which may have been included in your previous monthly rent.
Related: 5 Myths About Buying a Home
3. Homeowners insurance
Home insurance inspections are rare, but your insurance company could order one and even threat to drop your coverage if an inspection isn’t completed. In addition to making the required repairs, you could pay higher premiums as a result of the inspection.
According to the most recent data from the National Association of Insurance Commissioners, the average annual homeowner’s insurance premium cost $952 in 2015. That could be even more expensive if you need supplemental flood or earthquake insurance.
4. Mortgage payments can increase from year to year
If you currently rent an apartment, you may be tempted to buy a home because you’re tired of yearly rent increases. However, opting for a fixed-rate mortgage doesn’t mean your mortgage payment will never change. Property taxes can increase which will in turn affect your monthly payment. Major home improvements can also raise your tax bill because the assessed value of your home will increase.
Even though the “homeownership to-do list” never ends, there are endless perks that come with it. You get complete control of how your home looks and the renovations you want to complete. You’ll also notice a mortgage interest tax deduction on your tax forms, and you’ll be able to build up equity instead of “throwing money away” on rent. Considering taking the leap and becoming a First Time Home Buyer? Download this First Time Home Buyer’s Checklist we’ve crafted to help keep you on track with your home purchase.