College quiz: Is it better to buy or rent for 2021?
Are you trying to decide if now is a good time to put in the effort and money to buy a home? There are many questions that you should answer before making that decision. The financial question is only one of several that you want to start with. What about your personal life? Do you have kids that should be in a better school district and need a backyard to romp around in? Do you want your kids to have a dog that needs that same backyard? Do you need a home office to make working from home much more practical? What about a garage to park the car during the winter months and to enjoy hobbies such as woodworking?
If you are financially ready, let’s look at the bigger picture to help you decide if now is the time to make the big decision of buying your own home…
The cons are the shorter part of the pros and cons list. There are reasons why some people are willing to pay a landlord to manage their living space. The biggest advantage to renting is that the landlord deals with the taxes, insurance, repairs, etc. But make no mistake about it. Your landlord is charging a higher rent to cover these services and making a profit by doing it for you.
Another biggie that makes renting a preferred lifestyle is that you plan to do a lot of traveling. If you’ve become established working remotely, you might be thinking about relocating to Costa Rica or Thailand for a few years. There are many comfortable places around the world where you can live on a lot less money. The rent is cheaper and the cost of living is much less. This might be a financial as well as a personal reason why you want to continue renting rather than buying. It’s much faster and a lot less trouble to break a lease than it is to sell a house. Also, as a rule, it takes at least five years to recover the closing costs after buying a home.
Or maybe you have an upwardly mobile career. If you have good reasons to believe that you’ll be making considerably more money in the coming months or a year, it could make sense to rent until you qualify to purchase a bigger and better home. Just be sure that your chances for that promotion are reasonable and not pie in the sky thinking.
You may have other reasons to postpone buying even if you can afford it today. Take a few minutes to consider your personal reasons as well as your financial reasons.
I’m not going much into the financial reasons why buying a home is the American Dream. However, having a sturdy roof over your head should be a top priority for everyone. If you hit financially hard times and can’t pay the rent – out you go. That can happen in a couple of months, and you won’t have anything to show for it. It’s much easier to hang on to a home that you own for much longer and come out of it with money in your pocket even if you do lose the home. Lenders have programs to help you make up back payments if you miss a few mortgage payments. A foreclosure also takes much longer than a rental eviction and you can make up the back payments or start a new payment plan at any time up until the foreclosure is completed. The even better news is that you aren’t likely to be foreclosed on even if you are no longer able to make the payments. You might have to sell the house but in today’s rapidly appreciating market, you will likely come away from the sale with several thousand dollars in your pocket – money to keep a roof over your head.
Kids, dogs, and a yard are very common non-financial reasons to decide it’s time to buy. But there are more reasons.
- Buying your own home makes you feel like an adult. You gain the feeling of stability, security, and being settled.
- You have pride in ownership.
- You have complete freedom to renovate and decorate in any way that you want. You can have the appliances of your choosing instead of the landlord’s choosing.
- You have more privacy.
- Community involvement. This involves everything from having a stable voter registration to making life-long friends. You won’t be moving every two years, and neither will your neighbors. You’ll be more likely to volunteer at schools and for other civic activities. You’ll feel like you are part of your community.
- Tax benefits. Yes, this is a financial reason, but not only will you no longer be paying the landlord to do the property taxes, but your gain is also twofold. You’ll also start being able to write off property taxes and mortgage payments on your taxes. Not only are you paying the landlord to do those taxes, but they are also writing them off on their taxes.
- Take a moment to think about your reasons why buying a home now is the best decision.
Taking full control of your finances can be the adult thing to do but the decision to buy or rent isn’t only about money. Your parents telling you it is the right thing to do isn’t always correct either. But don’t brush off the financial reasons. You will almost certainly come out financially ahead if you buy a house sooner rather than later. Still, your plans for the future, your career, other goals, etc. all play a role in your decision.
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It’s August, the last unofficial month of summer when all the college students start popping up around the Boston area. So here’s the big question many parents of college students may be asking: Is it better to rent an apartment or to purchase a condo for a college student?
On Beacon Hill, there are some nice 2-bedroom condos with an asking price of $525,000 (and less), probably more geared for the graduate student who wants some nicer digs. Granite countertop and perhaps a fireplace for those students who want a calmer, more upscale student living. Assuming a 20 percent downpayment on a 4.5 percent mortgage, the monthly mortgage would be just above $2100 a month. Find a roommate and charge them $1,200 which will make your part just slightly less.
For those with children heading off to a 4-year university, buying a place for the four-year period may be a consideration. Maybe the price won’t go up in a few years, but getting a Boston condo that can be lived in by your college kid and one of his or her friends can definitely help defray, if not cover, at least half of the mortgage expenses.
Please note: Taxes, condo fees and insurance must be considered. Also it’s possible to purchase two bedroom condo in Allston/Brighton for as low as $230,000.00.
What are your thoughts?