couple in front of home

We've always been told buying a house is one of the best investments you can make. But is it really? When it comes to buying a home, there are many things to consider besides the mortgage payment.

What's best for you?

So before you make a down payment on your dream home, take a long, hard look at your finances and make the best decision for your situation.

More than just a mortgage

Many people think if their current rent payment equals a possible mortgage payment, then they should be putting their hard-earned money into something they can call their own. This seems like solid logic, but owning a home is much more than paying your mortgage. When you buy a house, you are first required to pony up a down payment (you'll want to lower your mortgage), which will be in the thousands. But more than that, you have to pay property tax, homeowner's insurance and shell out a lot of dough for home maintenance and repairs. All this adds up, and according to financial guru Suze Orman, when figuring out the real total of your monthly payments, you should add 40 or 45 percent of your mortgage to determine what you'll actually be spending.

Future plans

If you have the down payment and are prepared for all the extra costs, the next thing to consider is how long you plan to live in that house. If relocating is a possibility, renting is probably the best option so you won't have to go through the hassle of selling or, even worse, losing money on your investment. Job security should also be a factor when deciding what to do. If you're just out of school or if there's a possibility you could lose your job or get downsized, you might want to hold off on making such a large purchase.

Resale value

If you plan to live in your home for several years, it could be a great investment for you. But if you buy a home and try to sell it shortly thereafter, especially with the market the way it is today, you'll probably lose money. If something changes in your life and you need to make a quick exit (if you get transferred or the new job you find is in another city, for example), you might not be able to unload your house for a decent price.

Benefits of home ownership

Of course, if you have the money, plan to live in your home for years and don't foresee needing to make a quick getaway, then there are many benefits to buying a house. Not only is it a good investment, but you'll receive tax breaks, be eligible for home-equity loans, free yourself from landlords and be able to make any kind of improvements you wish, which will only add to the resale value.

Rent or buy?

Buying a house is a big decision and has many benefits, but it's also all about timing. So take a hard, realistic look at your finances and where you plan to be in the next few years. If financial planning isn't your thing, you can even consult a financial planner, who will not only give you insight on whether you can afford a house, but can help you make a plan that will allow you to do so in the future.

More about buying a home

7 Things to know before buying a home
The benefits of buying a house
Home buyers may choose between loans

Tags: renting

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Comments

Comments on "How to decide if you should buy or rent a house"

Amber March 16, 2013 | 3:20 PM

I say buy. It's a good market to buy now, plus your house value will most likely only increase by the time you're ready to move. Plus, you're working your way towards owning something!

Bethany January 06, 2013 | 11:22 AM

Great factors to consider here. For what it cost to get into a house, you really need to plan on being there long term for many reasons. Loan fees are substantial for starters, especially on FHA and similar type loans. Also, if you for some reason must sell shortly after real estate fees are 6 % so you could potentially lose a substantial amount of money in the process. On the flip side, mortgage rates are at an all time low and you will most likely never borrow for less in your lifetime. We bought recently and are very glad we did, but are lucky as my husband is a contractor and able to do all maintenance and repairs at a minimal cost.

Lauren September 04, 2012 | 4:30 PM

We just bought our first home, and yes we love it, but it does come with a bunch of added expenses that we didn't think about. Yard tools, fixing it up, higher electric bills, fixing appliances, etc. It's all part of owning a home and you have to make sure you really are financially ready.

Jackie August 27, 2012 | 12:07 PM

My husband and I are both professionals but we are not ready to settle down just yet in our jobs. We also plan on having kids some day, however, we are postponing that decision for a later date. Therefore, renting a home makes the most sense for us at the moment. Buying a home in my opinion is a long-term commitment that involves laying down roots, and we are just not ready to do that right now. This article makes a good point about how purchasing a home in the short term is a risky investment, especially in this market. My husband and I are still straddled with huge college debt, so losing money on a short term home purchase is the last thing we need. Thanks for noting the benefits and advantages of renting a home.

Cara August 27, 2012 | 11:20 AM

I am glad to hear somebody advocate renting rather than buying a home. In our society it seems like all we keep hearing about is home ownership being touted as the ultimate status symbol and measure of the American Dream. The truth is that there are plenty of good reasons for renting a home as this article points out. I am all in favor of homeownership when timing and circumstances are right, but for some people renting is the better and more sensible option.

donna September 19, 2008 | 3:49 AM

I really need some advice. I can,t decide what I should do.I have enough money to buy this house trailer,it,s a 2004,one owner ,she is old and not well and moving in with her daughter,the trailer is like new.She asking 10,000 dollars for it.I am a single not working mom of a 15 year old son.It is a 3 bed-room home! Please help me decide,time is running out and some-one may beat me to this deal!Help!!!!!!!

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