Rental Property or Buying a Home?

Everybody has to live somewhere, but buying your own home comes with major obligations. Renting a property is not necessarily a cheap option but you have fewer responsibilities and if something goes wrong, in theory, a call to your landlord is all that's needed.

Renting a home often makes sense. If your job situation is likely to change or you are a student, you can rent a home for a short period until your circumstances or finances become more solid. During times of economic recession, when massive company layoffs bring uncertainty, renting is a viable option for those who do not want a huge financial commitment.

 

Renting a property offers several perks. For those who live lean, there is the option of renting a home that is already furnished. Moving requires nothing more than boxing up the smaller, personal belongings. From a financial perspective, your landlord is responsible for property management and maintenance. So, if you discover that the roof is leaking or the window frames are rotting away, it won't mean a dent in your bank account. Many landlords pay part, if not all, of some utilities such as water, trash and sewer. Keep in mind that many landlords do require at least a six month lease and one month's rent as deposit. A small pet deposit also usually applies.

At some point, you'll probably get tire of handing over your hard-earned money to finance your landlord's property and will want to purchase your own.

If your situation is stable, in the long term, buying your own home is likely to be a sound investment. In time, you'll have paid off your mortgage and the property will be yours. However, getting onto the property ladder can be expensive. While in the past, lenders implemented creative terms and offered 100 percent financing on certain properties, the rise in delinquencies and foreclosures has dictated a return to traditional loans. Home loan applicants are now required to give at least a 20 percent down payment and must have a stellar credit history. FICO scores are often required to be upward of 700 points and your job stability is also a consideration. Additionally, lenders look at your pay history, collections and cash reserves.

 

Understanding mortgages is the first step to successfully purchasing your own home. Whichever way you decide to finance the purchase, you'll also need to budget for inspections, loan fees, homeowners insurance, furnishings and any property upgrades. Unlike living in a rental property, when you own a home you have property maintenance obligations. However, you'll be the beneficiary of rising property values and home equity, not a landlord.

As any real estate agent will tell you, the location of the property is the most important factor to consider when deciding which property to buy. A well maintained home in a popular area always attracts buyers, whatever the state of the general property market.