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Renting vs Buying A Home
Which Is ACTUALLY Better?
Millionaire Syrup
January 29, 2024
Renting vs Buying A Home
Which Is ACTUALLY Better?
Buying A Home
DOWN PAYMENT:
Typically, when applying for a loan, lenders often require a down payment of 10-20% of the purchase price. This serves as a financial commitment from the borrower and helps secure the approval of the loan.
MORTGAGE INTEREST RATE:
The borrowing cost is currently the steepest it's been in over two decades, standing at slightly above 7%.
PROPERTY TAXES:
When it comes to property taxes, they vary by state. For instance, in Hawaii, you'd pay a relatively low rate of 0.3% per year, whereas in New Jersey, the rate is significantly higher at 2.5% per year.
INSURANCE:
Bankrate suggests that the typical home insurance cost for a $250,000 house is around $1428 yearly. However, considering that about 66% of homes are reportedly underinsured, you might end up paying closer to $2200 for a comprehensive policy.
REPAIRS AND MAINTENANCE:
In the long run, it's advised to set aside around 1-2% of your property's value each year for regular maintenance and repairs.
Tip #1
When buying a home, it can be a smart move to consider buying something that requires some work, like a fixer-upper. By investing time and effort into improving the property, you can increase its value. This way, if you ever need to sell it quickly, you'll have a safety net to cover any potential expenses and avoid coming out of pocket. It's a strategy that can help protect your investment and minimize financial risks.
Renting A Home
It's actually pretty straightforward to figure out the cost of renting a home. You simply pay the price that is agreed upon, without any additional complexities. However, a recent analysis suggests that in all but four major US cities, renting is more affordable compared to the cost of buying a home.
Final Outcome
If you're thinking of living in your home for less than 10 years, renting is usually the cheaper option. Renting allows you to manage your cashflow without having to pay a significant amount upfront. Plus, it gives you the flexibility to move quickly if needed. So, renting can be a better choice in terms of affordability and flexibility.
If you're thinking of staying in the same home for more than 10 years, buying a home is usually a smarter option. When you buy a home, you have the freedom to make any renovations or upgrades you desire. Additionally, by owning a home, you can lock in your mortgage payments and potentially benefit from the property's appreciation over time. It's a great way to invest in your future and build wealth.