Rent vs. Buy Calculator: Should I Rent or Buy?

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Trying to calculate whether it’s better to rent or buy? Using a rent vs. buy calculator can help you estimate some home-buying costs, but there are a few other things you’ll want to consider before choosing where to live and deciding whether or not you’re ready to buy a home. Let’s go over a few of them.

 

Is now a smart time to buy?

You might have heard that the housing market is pretty competitive right now. That’s because a lot of people are interested in buying homes right now, and many of those people are currently qualified to own one. We’ll get into qualifications in a moment, but it’s worth noting that this is driving up the prices of homes in areas where there are a limited number of homes available. However, while some people may choose to wait it out—they may be waiting a while. Because the housing market might be unlikely to crash anytime soon.

 

Current home mortgage rates are also still relatively low, making it more attractive and affordable to purchase a home. At the same time, rent in many places has gone up. With all of that said, now could be a great time to purchase a home. Just remember to be flexible. Don’t fall in love with one home and feel like you have to have it, regardless of the price.

 

Some realtors might expect you to offer over the asking price in a competitive market. This might make sense in some situations—if the asking price is currently under market value or the value of the home is most likely to go up—just remember that you can’t guarantee that a home’s value will go up. You also don’t know how long it will take to rise. If you buy a home over the asking price, you are taking some risk that your home’s value may never appreciate to what you paid for it.

 

Offering over the asking price may also put you over budget and increase your home buying costs to too high a level for your own comfort. If you are going to buy a home, make sure to stay within your set budget.

 

Am I qualified to buy a home?

Using a rent vs. buying calculator could show you how much you might save when you buy vs. rent a home. But this won’t matter much if you aren’t qualified to get a mortgage. And before you start choosing where to live and shopping for homes with a realtor, you’ll want to get pre-qualified if you’re serious about buying. Some mortgage lenders offer you the ability to get a pre-approval letter online with just a few questions. This approval letter can help you determine a budget and make a strong offer on a home when the time is right.

 

But how much home can you afford? You can use this mortgage calculator to help you determine that. Just keep in mind that a standard down payment is about 20 percent. You will get the best loan rates if you can offer a full down payment. However, if you have good credit you might still be ok offering less. This depends on things like how much debt you have, how much income you earn, and the cost of the home you want to buy.

Will buying a home save me money?

At some point, if you stay in a home long enough, you’re likely to save more money owning a home than renting one. But there are a few costs of owning a home to consider. Using a rent vs. buy calculator can help you determine some of these, like the cost of property taxes—which could add to your home-buying costs (there are also tax benefits to buying a home). You’ll also likely want or need to make improvements to your home. These costs can add up and sometimes, hit when you least expect it. When you rent, this is never really your problem although waiting on maintenance sometimes can be a hassle.

 

When choosing where to live, you might also need to consider home owner’s association fees (HOA), which might add to your monthly mortgage. This could be especially relevant if you’re trying to decide between renting or buying a condo. In larger cities, some HOA fees are quite high. And unlike your monthly mortgage, where you stand to make that money back when you sell your home, HOA fees are more like rent—it’s money you’ll never see again.

 

Without a rent vs. buy calculator, you can still determine which option is best for you. Just get a pre-approval letter online to see how much home you can afford. Remember, you don’t have to max out your budget. You can always buy a home that’s cheaper than what you can afford. With this number, do a quick search of homes for sale in your area with a set budget in mind. Most sites will tell you what the estimated monthly mortgage would be.

 

Keep in mind, these numbers are often based on a good loan rate on a 30-year mortgage. But it’s a good place to start. Is the estimated mortgage more or less than what you currently pay in rent? Even if the cost is slightly more, remember that a mortgage is money you are paying to yourself, and in the long run–buying the right home could be a smart money decision. You might also read this article on cities where it’s better to buy than rent.

 

 

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Published 04.21.22

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