Do I keep renting or do I buy?

Megan Uncategorized February 4, 2019 | 0

For a long time, conventional wisdom seemed to be that you grow up and buy a home because that’s just what you do…

But lately, people are realizing that it isn’t always the smartest financial move. Obviously, the housing crisis has a lot to do with that —it’s made people question the standard assumption that home ownership equals financial stability.

One Rule of Thumb

Your home should cost no more than 2.5 times your salary. Of course, this just gives you a ballpark figure.

Tips to help you determine what home you CAN afford:

● Take-home pay (after taxes, after tax-deferred retirement contributions)

● All of your other debt (consumer/credit card, student loans, auto, etc.) and monthly payments. Note: that if you have high interest loans, you should pay them down before looking to buy a home.

● Consider your other priorities (children, retirement)

● Calculate your down payment amount. It might make more sense to save and wait.

● Use a mortgage calculator to see how much you can afford, but add in the estimates for the above costs.

● Leave a cushion in your monthly budget between income and total monthly expenses. $50,000 instead of using it for a down payment, and also invested the amount.

Ref: 20Finances

Sometimes, you can actually earn more money over time

by renting and investing rather than buying..

But whether or not this is true depends on a few factors:

● Your rent cost: If your rent is cheaper than your mortgage, you may be able to Invest the difference and earn a better return, long-term.

● Down payment & mortgage interest rate : Same story here. If you invested $50,000 instead of using it for a down payment, and also invested the amount you paid in interest over time, how much more would you have in the long term? In some cases, you’d have more than the value of your home..