Making the decision to buy or rent a home is one of the most important choices in a person’s life. These are some of the things that should be considered when making this type of decision: what is the five-year plan, what are the financial implications of this decision, and what type of maintenance are you comfortable with. When deciding to rent or buy, a person needs to weigh all options.
The price-to-rent ratio is a good first step in the process of deciding to rent or buy a home. The price-to-rent ratio is calculation that compares the total cost of homeownership (which includes mortgage principal and interest, property taxes, insurance, closing costs, HOA dues, and mortgage insurance) with the total cost of renting a similar property. For example, in a market where a three-bedroom house costs $500,000 and the monthly rent for a similar home is $2,000 or $24,000 annually, the rent ratio is approximately 21. According to www.trulia.com, with a ratio of 1 to 15 it is better to buy than rent, a ratio of 16 to 20 it is typically better to rent than buy, while a ratio of 21 or more it is much better to rent than buy. This is not the only thing to consider in the process of making your decision, but a very important starting point.
Another key factor that should be considered when looking at a new residence is how long one plan on staying in area. According to a report on www.bloombergy.com, there has been an increase of 33% in house prices since 2006 has made renting to appear more favorable, and that trend is expected to continue in the next four to five years. It appears that people who value mobility, have blended families, travel constantly may consider renting instead of buying. If he/she does not plan on living in one place for more than five years, then home ownership may not be the right choice at this time. Consider where you are in your career. If you often travel or transfer from place to place, the length of time to sell your home...
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