Rent vs. Buy: What's right for you?

For years the ultimate sign of wealth, of “making it,” was owning a home. But nowadays, up-and-coming generations have accepted that homeownership isn’t for everyone.

But how do you know if homeownership is right for you? Here are a few things to consider while weighing the pros and cons of owning a home:

Owning a home is a great way to build wealth.

According to Forbes, renters typically do not receive any kind of return on their rent costs, which consume an average of 32% of the typical American’s yearly income. Homeownership isn’t a “get rich quick scheme “ but is a tangible way to build long-term wealth.

Think about it. You could spend $1,000 on monthly rent that provides a roof over your head - but it doesn’t build a long-term investment like $1,000 towards a mortgage. And with rent prices on the rise, putting that income into a home rather than losing it to rent could make more sense for you.

But will owning a home improve your quality of life?

Let’s put aside the long-term financial incentive of homeownership. Instead, ask yourself will owning a home make you happy.

But before you answer, ask yourself:

Can I commit to the expenses of owning a home, like routine maintenance, improvements, etc.?

Will I be able to enjoy the home, or will I be traveling all the time?

What benefits will home ownership provide?

Will I still be able to maintain my quality of life while shouldering the financial burden of homeownership?

The expenses (and responsibilities) of being a homeowner go well beyond the mortgage payment - something to consider before owning your home.

Do you need the flexibility of renting?

If you have a more mobile lifestyle, renting rather than buying may be better for you. For example, a digital nomad needs the freedom to move whenever they like. So renting a home may fit their lifestyle better than homeownership.

But keep in mind that flexibility comes with a cost. Rent prices are at historic highs, especially in trendier cities. But if you own a home with a fixed-rate mortgage, you’re shielded from inflation, price hikes, and other economic factors that could affect your monthly payment.

But what about that 20% down payment on your mortgage?

Let’s talk about the myth of the 20% down payment. Yes, it’s great to have 20% to put down on a home, but it’s not the standard and not needed. According to Bankrate, the median national down payment was 13 percent in 2022. The truth is that there are plenty of programs and mortgages out there that work with buyers that have lower down payments. Conventional loan programs start at 3% and 5%, and FHA loans at 3.5%. If you or the property qualifies for a VA loan or USDA loan, your down payment could be 0%! You should talk with your mortgage agent to determine what works best for you!