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Sasha Grabenstetter
Extension Educator, Consumer Economics

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Plan Well, Retire Well

Saving and investing your money

Thursday, February 5, 2015

Sasha Learns: How to Buy a House -To Rent or Buy?

Posted by Sasha Grabenstetter - Author Sasha Grabenstetter Home Ownership How to Choose/Purchase a ...

To rent or buy, that is the question! After being a renter for the last eight years of my life, I like the benefits of being a renter. I'm not tied down to my home and can move anywhere in the country. If something is broken, my property owner fixes it and I don't have to shovel snow or water the lawn! When my husband and I decided it was time to look around to buy a house I had some hesitation. We had to ask ourselves if we were ready for this leap into the financial unknown!

With help from the Financial Planning Association, here are some questions you should ask yourself and your partner whether you're ready to continue to rent or purchase a home:

How long will we live in this house?
Am I ready for the upkeep and repair responsibilities?
How much home can we afford?

The 5 Year Rule?

All across the internet there is this question floating around of "How long should I live in a house before selling, to make it worthwhile financially?" While this number is disputed, one thing that is certain with any mortgage you will be paying more in interest than principal in the beginning. Only after 14-16 years of a 30-year mortgage do you finally start paying more on the principal. It seems that first-time home-buyers aren't sure how long they plan to live in their homes either. According National Association of Realtors about 12 percent of first-time buyers plan to live in their homes 4 to 5 years while a whopping 37 percent are unsure of how long they'll be there. While I hope to live in our house for at least 4 or 5 years there really is no way for us to be certain.

Affordability

As a renter, if I could afford the rent, like the location and space then I would sign a lease within a week or so. When buying a house there are a lot of other factors to consider including location, schools, neighborhood not to mention the financial aspects like private mortgage insurance, homeowners insurance, maintenance, upkeep, and property taxes. Knowing how much home is important that way you're not pushing the boundaries of your budget. One tool to consider is Bankrate's calculator called: How much Home you can Afford? This handy calculator can help you figure out an affordable home mortgage amount.

Another resource available comes from North Dakota State University called "To Rent or Buy? The Choice." This worksheet has a section where you can put all of your expenses and decide if buying a house is for you. Plus, it has some other great information on the different types of homes and advantages and disadvantages of buying vs renting!

Making the decision between renting and buying isn't an overnight decision. Start with the above questions, consider making a pro/con list of the benefits of living in an apartment verses the benefits of living in a house, then once you're comfortable check out the resources that were mentioned to help you make a clear decision on what you want to do for your housing needs!

Until next time,

Sasha

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