Rent or Buy in 2012 for Under 35
Buying a house is a responsibility most people are willing to take at a young age. However, just because the willingness is there, does not mean it’s absolutely the right thing to do at the time. There are both good points and not so good points to buying and renting, and the choice is ultimately what will fit your lifestyle and financial stability at the time.
Stay in one Place or Move About?
If you haven’t decided where to settle down or just like to change locations from time to time, a rental might be more your style. Renting an apartment will give you the flexibility to move at will if you’ve signed a short term agreement. Some landlords will let you out of a long term lease in a good market for them and they have the ability to charge more to the next tenant. However, if the market is soft and they wouldn’t be able to rent the place quickly, they likely will make you pay to get out of the lease agreement.
The ability to move easily will also give you the opportunity to test drive an area before making the ultimate financial plunge and purchasing a home. It will also give you time to thoroughly research the area and check into the school system or educational options find out what moves the city or town and see the government in action.
Renting tends to have less upfront costs than purchasing a home. A rental lease usually brings with it a security deposit, first and last month’s rent and sometimes a cleaning deposit. That is certainly cheaper than the buying or selling costs associated with a home. Rent and any bills such as utilities and insurance will still allow you to save money, where someone paying a mortgage usually does not realize savings for about 5 years. The ability to save will allow you to save money for a home when you feel you are ready to tackle a mortgage loan.
Utilities in an apartment are typically lower than in a home, especially if rent includes some or all of the utilities. As a tenant, you will not be required to pay property taxes, upkeep, maintenance or homeowner association fees directly, as some landlords include a portion of the owner related fees in your rent.
Apartments come with perks for the benefit of the tenant at no added cost to you as a tenant. A lot of time, the perks are things you might not have at home such as a swimming pool, tennis court, and fitness center and onsite security. If there is a laundry room, there are most likely multiple washer and dryers which give you the ability to wash and dry your clothes in one shot instead of doing individual loads with one washer and dryer.
It’s Time to Own
When it is time to settle down and stay in one place, homeownership comes with its privileges, in addition to a mortgage and other expenses such as taxes, insurance, upkeep and utilities. However, with that financial responsibility comes equity and someday total ownership. Owning your own home allows you to do just about whatever you want as long as it does not violate and zoning laws, or any other regulation that protects all the residents.
If you have a fixed rate mortgage, you know what your fixed price costs are. Utilities, insurance will fluctuate from time to time, but your mortgage payment will remain the same, unless it changes according to your lending document. Rent, on the other hand, increases almost yearly and sometimes those changes are significant. Mortgages also bring tax benefits that can be helpful at tax time.
To a lot of employees, home ownership means stability, where renting an apartment means no roots and no enticement to stay in one place for a while. That makes employers wonder if their employee will stick around for a while or be a hit and run employee and be gone after a year or two. Buying a home usually has a lot of upfront cost. By age 35, most people have spent at least 10 years in the work force earning money. In ten years a prospective home buyer should have enough savings put together to purchase a home without a lot of financial strain.
Currently, lending rates are attractive and reasonable for someone starting out in the working world. Fixed rate mortgages are economical right now and once that mortgage is paid off, you will live in it for the price of taxes, upkeep and insurance. When that mortgage is paid off, you will be able to save a significant amount of money and that is especially important if you are still working and saving for retirement. While you are still working and just prior to retirement will be an ideal time to take care of any costly repairs such as a new roof, electric or plumbing upgrade or a new heating system. It might be the right time to put in a swimming pool to enjoy during the golden years.
Buying that home after you are 35 may find you retired and paying a mortgage loan. It is important, when planning for your financial future, to take into account you may have a mortgage to pay on retirement funds, even if your intentions are pay that mortgage off before retiring. That should not be a deal breaker, but it should be something given serious consideration. It is worthy of thought to decide what your expenses will be leading up to retirement and after retirement.
In 2012, a lot of house on the market are foreclosures. Those houses can be purchased at bargain rates, which will lower your monthly payment. A lower than usual payment will be easier to handle and even if a 30 year fixed mortgage is taken out, it will be easier to pay it off earlier, if your lending contract allows it. If you are under 35, this will allow you to pay off the mortgage and still save a significant amout of money before retirement.