When looking to move into your own home, knowing whether you would like to be buying or renting is realistically the first determination youshould make. There are several reasons for either option, and the better option varies from person to person.
Buying a home is one of the biggest steps in life and, to many, a major milestone in life. According to CNBC, “not buying a home is the single biggest mistake for millennials “. The CNBC article further quotes David Bach, co-founder of AE Wealth Management, who claims that “buying a home is the escalator to wealth in America. Homeowners are worth 40x more than renters.” To further these points, there are some more evident advantages to buying. One is the financial gains that can be provided by the appreciation of a property. Homes have the potential to increase in value quicker and heftier than stocks can, and when those gains develop the appreciation increases the entire home’s value rather than just the initial down payment invested.
Another convenient advantage was revealed by a CoreLogic analysis. The current monthly interest of ~4.5% makes the median mortgage payment practically equivalent to the median rent for the properties in the same area, so the same payment you’re making to a landlord could potentially be going toward a mortgage on your home. To make this more relevant to our area, the 22% millennial occupied Detroit-Dearborn-Livonia, Michigan area boasts an average of home price of $95,000 and an average rent of $1,300. So realistically, a 10-year $95,000 mortgage with a 4.5% interest rate would amount to a $984.56 monthly installment, only difference is your monthly payment is going towards actually owning the home.
Despite these attractive advantages, owning a home has plenty of strings attached. To expel a potential misconception, buying/owning a home does not start and stop with securing and making payments on a mortgage. Along with that mortgage, one should expect to handle things like property taxes, home insurance, and the inevitable repairs and upkeep that’ll be required. The affordance of time and money can make renting a very viable option for people. Putting a down payment on a home may not be something achievable for many individuals, and the maintenance of owning a home can prove unappealing.
Ideally, buying a home is the better option. At the end of the day you could either be spending your allotted budget for a home on rent or a mortgage. However, things vary from case to case and renting is completely understandable and can make more financial sense. Currently, millennials are seemingly preferring to live in cities rather than rural areas, and that means living in places where the cost of homeownership is just out of the question.