Should You Buy or Rent Your Home?

Are you tempted to buy a house? Years of price declines have made buying a home more affordable than renting in all and in many places of the world mortgage rates are still appealingly low. But is that a reason to buy a new house? Before you decide on a lifetime of mortgage payments and home-maintenance routines, here are a few questions to help you decide whether you should rent or buy. There are just few indicative answers and discussions; plan and result may vary according to different peoples.

1. Where do you live?The cost of buying versus renting varies greatly from city to city. A smart way to weigh the two options is to divide the average asking price for a home in your city by the typical annual rent for a comparable home. This will yield a price-to-rent ratio. For example, if the average sales price is $200,000 and average rent is $3,000 per month -- that’s $36,000 per year, then the ratio would be 5.5:1. In general, a price-to-rent ratio below 15 benefits buyers; above 20 rewards renters. Ratios between 15 and 20 can go either way, depending on a number of factors, from taxes to appreciation potential

2. How long will you stay put?Remember that home buying is a long-term commitment. If you're not planning to stay in the home for at least five to seven years (or minimum 3 years), think twice. Some cities the average origination and title fees are very high. So ask yourself, in the next five years, might you need to relocate for, say, grad school, a new job, your future spouse or hypothetical children? If so, renting will allow you the flexibility to pick up and move on short notice.

3. What is your monthly budget?As a homeowner, you'll have a lot of big new expenses to cover with your same old budget: mortgage payments, utility bills and costs for standard upkeep. Plus, you should consider beefing up your emergency fund for less-routine maintenance issues, such as a fallen tree branch or a burst pipe. All of those new costs can be pretty intimidating. But if you've got room in your monthly budget, home buying makes sense for the long haul. You'll be building equity, and your housing costs won't be exposed to inflation like they are with renting.

4. How much do you have saved?
The sexiest housing market in many parts of the world offers nothing if you don’t have savings. Putting down 20% of the sales price is a common requirement. That number may seem steep, but it will help you qualify for the best loan terms, and it eliminates the additional cost of private mortgage insurance.