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Should I rent or buy?

Posted June 25, 2014 in Altoona, Advice Column, Pleasant Hill

The choice is easy if you need to remain flexible. Perhaps you don’t know how long you will be staying, but you will be there for awhile. Perhaps you want to save money to be able to put more down on your first home. Remaining flexible to renting or buying is good to do for awhile as you get your feet firmly on the ground and figure out what your future holds.

Some do not have a choice to buy or rent; the only option is to rent, based on past credit or housing history. With this knowledge, you should call upon your mortgage lender to see what the time frame is that you are going to be out of the home ownership market temporarily. Together, formulate a plan with your lender to get you back into the market when it works for you.

Choosing to buy or rent is one of the  biggest financial decisions you will make in your life. All angles need to be evaluated and thought through. A calculator is a great tool to have close by.  You want to figure how long you plan to stay in an area. You want to look at what deposits you have to put down in order to rent and what your potential costs to close on a home purchase might be as well. One thing you want to consider is spreading those costs over the amount of time that you plan to rent vs. own. You might need to look at the time it takes to sell a home once you decide to move and what you might be paying to sell your home as well.

What will happen in the future?
What will rent go up to over a period of time? What will value prices of a home go up to in the time frame you live in it? If you buy now, live there 10 years and the price of a similar house is selling for $20,000 more then what your investment was into a similar home, your investment was a wise one.  You have just gained another $20,000 in equity in your home.

If you rent for 10 years at $700 per month, and the rent stays the same for the 10 years, you will have paid out $8,400 per year x 10 years = $84,000. That is equity in a home that you do not own. You could have just paid for an entire house loan. Look at renting for shorter terms when you want to remain flexible and not permanent in your locations. You will also enjoy mortgage interest tax deductions if you own your home, which can help you deduct from your income and lower your taxes. Additional expenses are closing costs, rental fees and maintenance fees to consider as well.

If you are uncertain, sit down with your mortgage lender and talk it through. There is no charge to meet with a lender and bounce your ideas around.

Information provided by Lori Slings, Valley Bank, 160 Adventureland Drive, Suite H, Altoona, (515) 967-4700

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