Should you rent or buy a home?

Should you rent or buy a home?

Homeownership was once the cornerstone of the American Dream, but times are changing. More U.S. households are renting today than at any point in the last 50 years, according to a Pew Research Center analysis.

For many people, the comforts of home include a well-funded bank account — and in some circumstances, renting can be more financially savvy than buying.

Ask yourself these questions as you make long-term housing decisions. You might find that renting is the better option.

1. How long do you plan to stay?

Whether renting or buying a home is the best financial choice usually comes down to one thing: timing. Finding an affordable home (and later making a profit on it) depends heavily on how long you plan to keep the property.

According to Zillow, for instance, the current home listing price in Bothell, Washington, is $698,448, and the average rental price is $2,500. Assuming a 20% down payment on a home purchase or a 5% annual increase in rental price, you’d need to own the home for at least two years before it becomes the better option.

Keep in mind that not every market is booming. In fact, two-thirds of U.S. homes still haven’t returned to their pre-recession values, according to a Trulia report, and owners looking to cash out may have to wait until 2025 before securing a profit. Carrying debt is something of a risk, and a 12-month lease gives you the freedom to move and adjust your housing expenses based on your current needs and income level — two things a fixed mortgage can’t deliver. Do your homework and use a comparison calculator to help you understand the costs of buying and renting.

2. Do you know all the costs?

Comparing rental prices to mortgage payments is a good start, but it’s also important to consider the hidden costs associated with each….

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