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Whether or not to buy a home is a huge personal and financial decision. There are benefits and challenges to both. Here are some things to consider.
Length of Ownership
If you plan to live in your home for at least five years, buying may be a good option for you. In that timeframe, you can generally recoup the purchase and upstart costs of your new home, and build some equity.
Monthly Cost Comparison
In general, you should expect your monthly expenditures for your mortgage and related costs to be somewhat higher than rental payments, but keep in mind that you’re also building equity while you live there. Be sure to compare the cost of ownership to renting, and don’t forget the “extra” costs of ownership, such as property taxes, mortgage loan interest, home repairs and upkeep, lawn maintenance or association fees and more. If you anticipate a monthly debt load approaching 40% of your gross income, including your mortgage, you are probably not financially prepared to buy a home.
Down Payments, Deposits & Drapes…Oh My!
When you buy a home, you’ll have to put down a percentage of the purchase price as a down payment on the home. When you rent, you’ll have to make a security deposit to the landlord, which is typically equal to one-month’s rent. Do you have it?
After those costs are satisfied, you’ll also want to ensure some money remains for start-up costs like connecting utilities and buying some cute drapes for the living room. A home just isn’t a home without a few accessories…and electricity.