Should you rent or buy in east Idaho?
Sponsored by Patrick Malone, Century 21 High Desert
For many, moving into a home for the first time is a life-changing accomplishment. But others find themselves wondering if they should buy or rent a home, and the question is becoming harder to answer.
When it comes to buying a home, there are a lot of things to consider. According to financial expert Dave Ramsey, you should have no debt, a six-month emergency fund, and enough cash for a 10 to 20 percent downpayment on the home. He also advises that your mortgage payment should be 25 percent or less of your monthly income. ”
This leaves plenty of room in your budget to achieve other goals, like saving for retirement and putting money aside for your kids’ college funds,” says Ramsey.
The other factor to consider when it comes to purchasing a home is the amount of time you plan to live in that area. If you are uncertain about living in one area for more than three years, buying a home is probably not ideal for you, even if you meet all of the other qualifications Ramsey suggested.
Additionally, potential homebuyers should be aware of certain advantages and disadvantages to purchasing a home. For example, if you buy a home, each mortgage payment you make is an investment into your home – money that you could potentially recover if you were to sell it.
Depending on the housing market, there is a chance that your home will most likely increase in value over a long time, proving to be an even larger investment for you. According to Forbes Magazine, “since 1975, housing has appreciated by an average of 4.5 percent per year.”
And finally, when it comes to taxes, as a homeowner, you can write off the property taxes as well as your mortgage interest. These tax benefits are not available to those renting a home.
“Renting is a wise option for those who are uncertain about their future or who are new to an area.”
With all of the positives of owning a home, there are certain disadvantages. If suddenly you need to move and sell your home, it is not as easy to relocate as if you were renting a house or apartment. Additionally, quite a few unforeseen expenses come with homeownership, such as homeowner’s insurance, various insurance policies, property taxes, HOA fees and various home additions such as a fence.
“My husband and I are in the 14th year of owning our latest home. And the upkeep is driving us mad,” says Michelle Singletary, a columnist for the Washington Post. “Last year, we had to replace the air-conditioning system. There are some windows that need an upgrade. Our sidewalk is cracking and needs to be redone. It’s like our house is throwing a tantrum.”
All of these costs combined can add a significant financial burden to those who are financially unprepared.
Unfortunately, the dream of owning a home has sometimes been accepted as something that you must do when you have a family and start a career. But what if owning a home is not something that interests you?
“Vacancy rates in east Idaho are currently very low, and there is a high demand for rental properties,” says Patrick Malone, a real estate agent in Idaho Falls. “Historically, the inventory for homes on the market is very low. If you are looking to purchase a home, working with a dedicated Realtor will help you find the perfect home you’ve been searching for.”
Contrary to popular opinion, renting a home, apartment or townhome is not a waste of money at all. Yes, you are essentially paying a landlord of sorts to live on/in their property. But, Ramsey says, “As long as you’re paying to live, your money is being well spent.”
Renting provides a mostly stress-free method of living, and is perfect for those who are required to move around a lot for work, for those who travel often, for those who have not solidified their future career plans, and for those who are looking to pay down their debts.
“Renting is a wise option for those who are uncertain about their future or who are new to an area,” said Malone. “Renting is a great way to get to know the area they are living in and finalize what amenities they would like to have, as well as where in town they would like to live.”
“If you bought a house today and lived there for seven years, you’d save 33.1 percent compared to renting.”
Renting a home also means that you no longer have to stress or worry about maintenance costs and work. When something needs fixing or replaced, a simple phone call to the landlord initiates the repair process.
Depending on your preferences and financial situation, sometimes renting is a better option. If you do not wish to spend a significant amount of time keeping up with the chores of running a house, including things like yard work, renting might be for you.
Often there is confusion surrounding the utilities as a renter and who is responsible for paying them.
“If you are painting with a broad stroke, chances are you will be paying for your own utilities,” says Malone. “It is wise to budget for that expense if you are looking to rent.”
However, if you are looking to save money and invest in the long run, owning a home could be the best bet, as the value of your home could increase substantially, putting more equity in your pocket.
“If you bought a house today and lived there for seven years, you’d save 33.1 percent compared to renting,” says Ramsey.
With a variety of home loan programs available to homebuyers such as FHA loans or RD loans, working with a real estate agent will help you determine whether or not homebuying is right for you. Many renters are unaware of the variety of home loan options available to them.
In the end, there is no definitive answer as to whether you should rent or buy a home. The best thing you can do when trying to decide what is best for you is to work closely with an experienced local Realtor who can provide you with detailed information about your local housing market as well as the financial aspects of each living option in your area.