Should I rent or buy a home?

Should I rent or buy? At some point in our lives we all have this question. Half of the people you talk to say rent and the other half say buy. Every situation is different and there is no one size fits all when it comes to this question. Let’s talk about a few of the issues that can arise from this question and help answer some of the problems you may run across. I will agree with most folks out there that, now is a good time to buy a house. This is true only if you can afford to pay for a house. Just because you can pay the monthly mortgage payment does not mean you can afford the house. There is more than just a mortgage payment to deal with. When you are the owner you must pay for the maintenance of your home, and any other fees that are applicable. Maintenance includes things such as heating and air conditioning systems, roofs, appliances, plumbing and everything else in your home. Just because your mortgage payment is a little cheaper than paying rent it should not be the sole reason to buy a home. If you have a major repair it can cost thousands of dollars that will cause not only a house problem but also a financial problem. Then there is the “you can use interest on your mortgage as a tax write off.” Don’t get me wrong tax write offs are great but if you are paying more in interest to the bank than you are to the IRS you are not saving money, you are actually spending more in your interest. Example, suppose you make 100,000.00 a year income, and let’s say you pay 10,000.00 in interest a year to the bank. If you are in the 30% tax bracket, with this income that means you would pay 3000.00 in income taxes on 10,000.00. Now answer the question would you rather send the mortgage company 10000.00 a year to avoid sending the IRS 3000.00? If you save your money long enough and have patients you could start off buying your first house and have it paid for. But most of us cannot wait and get a mortgage. Here are a few things that will let you know that you are ready to buy a house. If you have at least a 20% down payment when the time to buy rolls around. Since the mortgage bust a few years ago this is becoming more common when you get ready to purchase. You should also should have 3-6 months of emergency savings left after the down payment. Everyone has been told these things are impossible to do now days, but that is not true if you have the patients and a good financial plan to get you there. You should not get a mortgage payment that is more that 25-30% of your net pay, anything much higher will have the majority of your money going into your home and you will not have much fun outside of that. Also you should get a 15 year fixed rate mortgage. We tell ourselves a lot of times that we will pay extra on our 30 year but we rarely do that. A 15 year mortgage pays off in 15 years every time. If you can do these things your home will be an enjoyment to you and your family and not a source of worry and financial problems. Let me know if I can help! Tim West Go West Coaching