The American Dream has always been to own a home, have a rewarding career, and raise a family. It takes more than just a dream to purchase a home, however. Homeownership is a plunge that requires confidence, commitment, and a strong grasp on your finances. Sometimes, renting is a smarter choice – but not for everyone. Here are the differences between renting versus homeownership, and which is right for you.
There are a few reasons why renting makes more sense than purchasing. For example, if you do not intend to live in the area for too long, renting an apartment or small home makes perfect sense. If you’re unsure of the region, or plan to start a family and may need a bigger space in the near future, renting now is the correct option.
Furthermore, renting can save you money early in life. A rental property may cost a few hundred dollars per month while purchasing a home will cost thousands. Many young individuals cannot front such a cost so early in life. Some can, but it’s rare.
Buying instead of renting a home must make financial sense before you make a final decision. The breakeven horizon, which determines the number of years it will take for purchasing a home to equal the cost of renting, varies by region. For many, $1,000 per month in rent equals $100,000 on a home. At least, that is what many landlords charge to rent a home. So, if the home costs the landlord $350,000 to purchase, you’re looking at over $3,000 in rent per month. That’s exorbitant. In this case, you’re better off buying a home for yourself.