When is renting a house better than buying?


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viktorsbox
Joined: 19-12-2019
Posts: 45
composed on: 22-12-2019 07:01
Title: When is renting a house better than buying?


Moving out of your parents’ house? Want to start a new life in a new place? Need to get your own place? At some point in life, we all face this situation. The question that pops right up is whether you should buy a house or just rent it. Some people tend to believe that renting is much better as overall it’s cheaper, easier and means you are able to move whenever you want. On the other hand, there are firm believers in having your own house ensuring you live in a good neighborhood with good school districts. Having your own house just feels more stable. But overall it just all comes to a question of financing. Considering your financial situation what is the right answer: renting or buying? Here are some situations where renting property would likely make a better deal more than owning.

Rent a house if you don’t plan to live in the area for a long time

You consider living in this place only temporarily. Do you want to move out soon, move to a different city or even a different country? Or you are not quite sure what are your future plans? Then buying is not the right answer for you. Buying comes with a lot of complications, a lot of documents and standard costs of home upkeep such as taxes or insurance. If you don’t plan to live in this place for more than 5 years - don’t buy it. The expenses will just simply not pay off. Moreover, you will also need to think about selling the house pretty soon as it usually takes a while. Finding a buyer is much harder than finding a renter. So if you are sure you will not be living in this place for the rest of your life - better find a place to rent.

Use the 36% rule to find out if you should buy a house

Most of the loan offices use the “28/36 rule” to determine how good you are financially to handle the mortgage loan. The 28/36 rule is just a way to determine your debt-to-income ratio.

Mortgage payments, insurance premiums and property taxes should not exceed 28% of your monthly pretax income. And at the same time, all other debts you gave should be less or equal than 36%. If you are the person who doesn’t fall under these requirements then you will not be granted a mortgage loan, meaning you won’t be able to buy a house and renting is your best option. Moreover, buying will be a great financial burden for you and you probably don’t want it.

You don’t have enough savings for a downpayment

For both renting and buying you will need to pay some form of downpayment and you will need to be able to afford it. While renting only requires you to pay for the first and last month and security deposit to ensure you have an apartment, mortgage down payment on a decent house might cost you much more than that. Most lenders ask for a 20% down payment unless you qualify for an FHA loan with a 3-5% down payment. If you don’t have enough money to make a downpayment - go with renting.