Settling on a new home can be a challenging journey. At the start of the process, you may be asking yourself several questions. One of the most relevant – and critical – is “how much home can I afford?” or “Does it make more sense for my family to rent or buy?”. Here’s some good news: at The Federal Savings Bank, we’re invested in making sure you have the right tools you need to make an informed decision, which is why we have launched our Learning Center. Maybe you are a first-time homebuyer seeking a VA loan, or you have a conventional mortgage on your home with an unfavorable interest rate – if you decide that you want to purchase a home, check our guides on everything from construction loans to buydown programs.
Pros and Cons of Renting
When considering whether to rent vs buy you need to keep in mind that renting is a popular option for people who want their housing situation to remain flexible – if they are attending graduate school, for example, or have careers that frequently require them to relocate.
It’s also important to remember that when you rent your home, you will usually pay a consistent amount to your landlord every month (as agreed in your lease). Homeowners on the other hand have responsibilities that renters are not on the hook for such as maintenance, property taxes, and upgrades.
However, if you do not own your own home, you may be missing out on the opportunity to build wealth for the future. The Federal Savings Bank is proud to debut a new tool that you can use to calculate the monetary benefits of buying vs renting for your financial situation.
Pros and Cons of Buying
When considering whether to rent or buy, know that owning your home – whether as the sole owner or as part of a condo project or co-op – is one of the very best ways to invest your money for future use. If your home gains value throughout the years, you will make a profit when it is sold.
On the other hand, a renter’s name is not on the deed to their home, and if the property is sold, they do not see any profit. If you are a renter, the money that has been used towards rents could have been used to build equity for yourself if you were paying for a mortgage instead. A property is an asset that you may choose to borrow against later – whether you use a cash-out refinance or second mortgage.
Want to see how much you could save in the next five years? Try our calculator!
Renting While Interest Rates Are High
High mortgage interest rates translate to higher mortgage payments. In this environment, those who are already renting usually choose to continue renting when it comes time to decide whether to buy or rent. However, it is always a good idea to consult one of our mortgage bankers to help you figure out what makes the most sense for your situation. In some cases, a renter may find that owning a home could be closer to their reach than previously thought.
Renting While Interest Rates Are Low
This is one of the other drawbacks of renting: when interest rates go down, your landlord may be able to refinance for a lower monthly payment, but you’re unlikely to see those savings as a renter.
How a Rent vs Buy Calculator Can Help You Decide
The Federal Savings Bank’s rent vs buy calculator is an excellent way to simulate a better financial future for you and your family. Browse real estate listings in your ideal neighborhood and use the list price of a sample home (or use the average value of the homes you like) to consider whether you are currently making the best use of the dollars that go to your monthly housing payment.
Other Factors to Consider
Remember there are many factors that make a home beyond its dollar value, whether you rent or own. Consider the school zoning, tax obligations, and cultural appeal of your new neighborhood—what’s most important to you?
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