What's Better: Renting vs. Buying a HomeJun 11 2013
By: Nicole Gates
Q: Can you give me any reason why purchasing is a wiser financial move than renting? Is there reason for optimism about the financial viability of home ownership in the future?
Victor: If you’re hesitant to buy again, my advice is to talk to a real estate professional in the market you’re moving into who can better help you understand all of the economics behind buying a home in the area vs. renting. Additionally, if you’re not familiar with the area, it might be a good idea to rent for a little while until you’re better acquainted with the area.
Q: I am interested in buying and then renting out the house so the renter pays the mortgage. This sounds great in theory, does it actually work? Also, would you advise buying at all? A recent Reddit post strongly discouraged buying since it shackles you to debt for the next 30 years.
Victor: Great question! Buying an investment (rental) property requires a large down payment than buying a home for yourself. It can be a really great investment; it can even help pay off your mortgage. There are ways to buy a 2-4 unit property with as little as 3.5% down, as long as you live in one of the units. But, consider where you’ll live in relation to the investment property – if you’re not close by, you’ll have to consider costs to hire maintenance people to fix anything that breaks. You also don’t have to be locked into a 30 year term – you can buy an investment property with a 10 or 15 year fixed rate mortgage.
Q: My wife and I have gone back and forth on seeking a 15 or 30-year mortgage. She likes the shorter loan term, but I’d prefer a lower payment. Can you briefly lay out the pros and cons of each?
Victor: On a 15-year mortgage payment, the total cost of the mortgage is much lower than on a 30-year mortgage. If you can afford a 15-year loan, that’s a great option (and the rates have been phenomenal lately).
To see the rest of the questions and answers, click here.