Having a house is a highly anticipated part of adulthood. But it’s no secret that once you become an adult, getting a house turns out to be a bit more complicated than you once imagined. Many people spend their school and post-school years living in an apartment, which is the smart choice for that period of life. Once you become a bit more established in your career and reach a more comfortable financial state, you may find yourself thinking more and more about a house. This comes with so many questions to ask yourself: Is it better to rent or buy a house? Can I afford a house? The difficult decision to make becomes whether you should rent a home or just go ahead and buy one.

When you’ve found yourself at the crossroads of renting versus buying a home, Hickory Point Bank is here to help! After you’ve read this post, we hope you’ll have a better idea of the benefits of both renting and buying a home, and confidently be on your way to making this important decision!

Factors to consider

Just like with the predicament of renting versus buying a car, there are many factors to consider that may help you decide between renting or buying a home. The main factors are your financial situation and what you’re looking for in a place to live. Ask yourself this: Do I need a more stable living situation or a more flexible one? What are my main goals? Also do a deep dive in your finances to determine how much you can afford to spend on housing every month.

These answers will most likely point you to one option over the other. Renting is a more flexible situation, as long as you’re okay with your money not going toward eventually owning the home. Buying is a more stable situation, as long as you’ll be there a while and can afford the costs (like down payment and other fees) that are associated with buying a home.

Renting

Renting a home is a step up from renting an apartment. You get to live in a standalone house, most likely with much more square footage to enjoy. The security deposit and monthly rent will probably be more than an apartment, but less than buying a home. You get the flexibility of being able to move when your lease is up, but you still have a landlord who can decide to raise your monthly rate or even sell the property and force you to find somewhere else to live. But you won’t have to worry about your rent being raised until your lease is up, and your landlord will be responsible for maintenance or repairs on the home.

Think about the questions you asked yourself earlier. If you need a more flexible living situation, renting may be your ideal situation. If you think you’ll be moving in a few months/years or have an unstable job, you may need the flexibility that comes with renting. Some claim renting isn’t a smart move since you’re not building equity in the home and moving toward full ownership. But since there are so many different financial situations and goals that people have, renting really can be the best option for some.

Renting is great for people who:

• Enjoy the flexibility to move
• Aren’t sure what area they want to live in long term
• Aren’t around much or don’t want to spend time maintaining/repairing the home
• Want a predictable monthly payment within the leasing period
• Have an unstable job/are in a career switch/may be moving again soon

If you:

• Have plenty of money for the deposit and monthly rent, but not for extra fees associated with buying a home
• Are okay with not eventually owning the home

Buying

Buying and owning a home is the conventional option most people want to choose if they can. While it’s more of a financial commitment, you are rewarded by building equity and a sense of ownership. Rather than only being responsible for a monthly rent payment, buying a home means you will need to provide a down payment and then pay for the rest of the home gradually with a mortgage loan.

It’s a common misconception that your down payment must be 20% of the home’s cost. For most first-time homebuyers, it’s actually only about 6% or lower (thanks to Federal Housing Administration (FHA) loans). Even so, a down payment can still be a sizable amount of money you’ll have to be able to pay upfront. After that you’ll be responsible for a monthly mortgage payment plus extra expenses like Homeowners Association (HOA) fees and repair fees. For more information on loans, visit our previous blog post about mortgage loans.

Buying a home may be your answer if you want a more stable living situation, plan on sticking around for at least several years, and you can handle all the expenses and more responsibility. If you’re still asking can I afford a house? visit our lending calculators page and scroll down to find several helpful mortgage calculators.

Buying is great for people who:

• Enjoy the stability and peace of mind of owning their property
• Will be settled in one place for several years
• Are willing to handle the responsibility of caring for their property
• Have a stable job and/or are raising a family in one spot

If you:

• Have enough money for the down payment, mortgage loan payments, and extra fees like HOA fees and repairs
• Want to build equity and eventually own the home

Renting versus buying a home

Renting	Buying
Flexible – able to move after lease is up, but landlord can raise prices each lease term or sell the property	Stable – not as easy to move out of but no landlord to raise prices or sell the property
Predictable monthly payment – often lower cost than buying	Higher cost overall – including down payment, repair/maintenance costs, HOA fees, etc.
Not building equity	Building equity and sense of ownership
Less responsibility – Maintenance/repairs done for you	More responsibility – must take care of maintenance/repairs
No special tax deductions	Tax deductions – benefit from mortgage interest deduction

So, is it better to rent or buy a house? It depends on your situation, and whatever you decide, this is a big decision that is important to think through. If you decide that buying a home is your preferred option, we hope you will come visit us at any of our locations across Central Illinois. We will be happy to assist you with any questions and walk you through each step of the mortgage loan process. Because when you invest with us, we invest in you.

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