With interest rates at their highest levels in over a decade, the question of renting versus buying a home has become a hot topic. Choosing which option works best for you will depend on different factors like your financial situation, lifestyle, and goals.
Renting a Home
Renting offers many benefits. It allows greater flexibility to relocate any time after a lease is over. This can be a huge benefit to those who have lifestyles that require frequent moves. Renting a home also usually comes with the agreement that the landlord will handle any home repairs and property tax bills, which can help save a lot of money. There is also no stress when home values begin to fall since the home is not your own investment.
On the other hand, landlords can increase rent each year or even sell the property, making long-term stays uncertain. Many people also consider renting to be a waste of money since it results in built equity for the landlord and not yourself. There are also no tax benefits of renting.
Buying a Home
Buying a home is a desire and goal for most Americans because it offers many benefits. One financial benefit is that owning a home builds equity that could then be accessible later through a home equity line of credit (HELOC), home equity loan, or home equity investment. There are also tax benefits of owning a home, including mortgage interest and insurance deductions, home office deduction, and tax-free profits on home sales. It also provides greater stability as the possibility of relocation is much smaller, which can be a huge plus for families. Finally, it eliminates the headaches of having to answer to a landlord.
Buying a home isn’t all positive. The initial investment is substantial and requires a lot of money, time, and effort. The financial risk is much greater since you could lose money if the value of your home decreases. There are also other home expenses to consider, including property taxes, repairs, and insurance, to worry about.
Renting vs. Buying a Home in 2022
The decision to rent or buy in 2022 is tricky but will ultimately be made depending on your own situation. Rent prices have skyrocketed across the country this year, with the average rental price up 20% compared to last year. On the other hand, interest rates on mortgages are high, as are home prices. With a cooling market, home buyers appear to be waiting until both rates and prices fall. The most important factors to consider are your monthly budget for housing, whether you’re ready for a long-term investment, and your desire for stability.
Debt Relief for Tenants and Homeowners
Whether you are currently rent, own, or are looking to buy a home, you should always try to remain within your budget for housing. For years, many people used the 30% rule to calculate their housing budget. This idea assumes that you should budget around 30% of your pre-tax income for housing. While some financial experts consider this rule to be outdated, it can be a good benchmark for your housing budget. Overspending on housing can lead to increased use of credit cards or loans to cover other expenses. Housing is an essential cost and budgeting for it correctly, whether you rent or buy, can help prevent stressful financial hardships later. If you need help with debt, give Debtmerica a call at 800-470-8155 for a free consultation.