buying a home, renting a home, first-time homebuyer
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Should you stick with renting...or is it time to buy?

Choosing whether to buy or rent a home is a big decision, affecting almost every aspect of your life, from your finances to your commute, your entertainment options to the people you spend time with. And when you factor in things like property taxes, interest rates, and the decision about whether or not to start a family, balancing the convenience of your familiar rental against the benefits—and complications—of homeownership can be daunting. If you're struggling with options and possibilities, here are a few key considerations that might help make the decision clearer:

Two Halves Make a Home

Assessing where you stand

The first thing to consider is where you are in your life. You'll probably want to think twice about buying if you're in a transitional period—for example, if your job is insecure, you're expecting changes to your life in the near future, or you're only planning to be in the area for a year or two. You'll want to be secure financially before you consider buying a home, as there are the costs of maintaining a property on top of the mortgage to consider.

Finances

It probably goes without saying, but buying a home carries a lot of costs, especially in the beginning. In addition to your down payment—which is a sizeable amount of money—you can expect other expenses, such as a home appraisal, homeowners insurance and closing costs to name the main ones.

And startup costs are just the beginning. If you own, there are mortgage payments, homeowners association fees if the home is in a community regulated by a homeowners association, and possibly private mortgage insurance (PMI), which is a requirement for certain loan types and when the homebuyer pays less than a required 20 percent down payment.

Renting is less expensive, at least in the short term. Startup costs usually include an application fee, a security deposit, first and sometimes last month's rent, and possibly a broker's fee. And, once you've moved in, you have to cover rent, renter's insurance, parking fees (if applicable), utilities, and laundry fees.

Of course, if you're already renting, you've already paid the startup costs and budgeted for the regular monthly expenses, which means that your finances will remain the same.

How much work do you want to put in?

Another thing to consider is how much work you want to do around your home. Owning gives you the freedom to personalize and renovate your living space property (at least, within the bounds of your community's homeowner covenants and guidelines), but it can also eat up a lot of your time. After all, painting rooms, installing new floors and planting flowerbeds can be a lot of work—especially if you don't like working around the house.

Renting takes a lot less effort. Chances are, your landlord will cover most of the maintenance on your home. While you might need to change the occasional light or replace a filter in your rental's heating or cooling system, there's a lot to be said for being able to call the super when the lights go out.

Lifestyle

Think about your lifestyle preferences. Are you more of a homebody or would you describe yourself as an adventurer? Do you like staying up late or getting up early? Do you like knowing your neighbors, or would you prefer to keep interaction to a minimum? Generally speaking, owning a home is more appealing for people who want to settle down—among other things, it gives you the option for stable housing, a sense of community, privacy, and more indoor and outdoor space.

But renting also has its benefits. Because of the lower short-term costs, you might be able to rent a place that's closer to your work, your preferred night spot, or your favorite cultural attractions. And, since you and your neighbors are likely to move eventually, you don't have to worry quite so much about building strong neighborhood relationships. Most of all, if you don't like your place, your neighborhood, or the nearby culture, you can always move when your lease is up!

Equity and tax advantages

In the long run, owning a home likely makes more financial sense. Homes typically increase in value, giving you a chance to build equity, which can provide you with a retirement nest egg for the future. Of course, this also requires that you stay where you are for a while. When you buy a house, plan on staying in it for at least five years to recoup the initial costs of the purchase.

There may be other financial advantages to home ownership, too. For example, home owners may be able to deduct the cost of mortgage interest, property taxes and points that they pay to secure a loan.

On the other hand, some states offer tax credit programs for renters, mostly aimed at low-income or elderly residents. If you're looking for a rental, you may want to consider available options and choose your next apartment accordingly.

Whichever way you go, don't rush into the decision—think about what you want, who you are, and where you want to be in a few years. After all, the best kind of home is one that fits with your lifestyle!

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