QUIZ: To Rent Or To Buy
Deciding whether to rent or purchase a home is a major decision in your life. Take the quiz below to gain insight on this decision and learn a little about the pros and cons of each along the way!
- What is your credit score?
- Greater than 740
- Less than 740
- I don’t know
Your credit score can have a large impact on your rate and even ¼ of a point can cost you thousands in interest over the term of your loan. Follow our tip sheet for ways to help increase your credit score. Don’t know your credit score? Go to freecreditscore.com to get your score. This is an important number to know for your future!
- Do you plan on moving in the next 5 years?
It costs money to buy and sell a house. You can expect to spend about 10% of the purchase price on realtor and closing costs. On average, homeowners recoup these costs within 5 years of buying their home unless there is substantial appreciation in the value of the house.
- Do you have more than 6 months of expenses saved?
Purchasing a house is more permanent than renting. Having a minimum of six months savings to cover your costs in case of an emergency is important to make sure you reduce any risk.
- Will you make a down payment of more than 20%?
In most situations, if you put less than 20% down, you will pay a higher interest rate & closing costs as well as Private Mortgage Insurance (PMI). In addition, the less equity you have in your home means you may not be able to take advantage of home equity loans or lines of credit if your come needs repairs that you cannot afford to pay cash. It also may increase your changes on being underwater in your home (owing more than it is worth) if the market crashes. Having said that, there are lots of reasons that it might make sense to put less than 20% down when purchasing a home. Read more about that here.
- Do you have unique needs?
If you have unique needs (lots of pets, large dogs, access needs, etc.), It may be difficult to find a landlord that will make exceptions for your circumstances without a increased, often substantial, cost.
- Do you value flexibility over stability?
Purchasing a home limits your flexibility to make a change in your life unless you are willing and able to rent your home instead of selling if something changes. In addition, having a good portion of your money wrapped up in your home limits your ability to have access to cash easily.
- Do you have a strong desire to design and decorate your home?
Landlords often do not give renters the ability to make changes to the house so your ability to design your ‘perfect’ home will be limited by what you are able to do within the restrictions of your lease.
If your answers were mainly A’s, it might make more sense to purchase a home.
If they were mostly B’s, you may want to consider renting.
Either way, given this is a large decision for your family’s future; make sure you talk to an expert. Reach out to our Home & Housing experts here.