Is it Better to Buy a Home than to Rent in in Hillsborough, Manville or Somerset, NJ?
Both purchasing a home and renting are more affordable than at any time in recent memory. But which offers the better financial advantage?
The obvious place to start when comparing buying vs. renting is the monthly payment. In markets where home prices fell significantly the past few years, those who purchase a home will likely have a lower monthly payment.
In most cases, Renting is better only if your rent is very low, or if you plan on moving in a few years. It's usually better to buy than to rent, but not in every case, and usually not right away. It usually takes at least a few years for buying to become a better deal than renting. That's because there are some big up-front costs with buying, and your monthly payments from buying are generally higher. However, those payments are building equity in your home -- you're "keeping" some of what you're paying.
Also, while you're making your payments, your home generally appreciates in value. After some number of years the equity you've paid into your home plus the appreciation will overcome the extra money you had to pay to get into the home. This is especially true when prices are near the bottom of the market like they are today!
I found an interactive calculator on the NY Times website that I think is very useful: http://www.nytimes.com/interactive/business/buy-rent-calculator.html. This calculator will help you decide if it is Better to Buy a Home or to Rent in Hillsborough, Manville or Somerset, NJ!
Also consider how your money is working for you. While all the rent a tenant pays goes directly to the landlord, homeowners get to recoup some of their monthly expenses. Each month a portion of your mortgage payment is used to reduce the principle you owe and increase your equity in the home. This makes paying the mortgage each month similar to a forced savings plan. And because homeowners can take advantage of tax deductions for property tax and mortgage interest, they can get back even more of their monthly housing expenses.
Another factor to consider is the ability to secure a fixed monthly cost. Rent typically rises a few percent annually so those who rent will likely see their housing expenses rise each year. On the other hand, individuals who purchase a home with a 30-year fixed mortgage can count on having the same monthly payment over the course of the loan. So even if renting a property might cost a few dollars less each month initially, over the course of several years it could actually end up being more expensive than buying a similar property.
When is it better to rent than to buy? Financially speaking, the rule of thumb is that if you don't stay in a home for at least 3 years, you probably won't break even on the closing expenses incurred while buying it. That is, of course, as long as you're not speculating that property values will rise dramatically. Given the high costs of owning a home, it's possible that you will not see the financial benefits of buying for 5 to 10 years.
Renting relieves you of the risk and headache of maintaining and repairing the structure--if a pipe bursts, it's not your responsibility. Some people also value the flexibility it offers--i.e., the freedom to pull up stakes, not having to go through the process of selling a home. And with lower monthly payments, renting may allow you to save more for a down payment.
If you are considering a move into or out of Hillsborough, Manville or Somerset, it pays to plan ahead. Start with me to search homes for sale or rent in Hillsborough, NJ. I focus on Hillsborough but am well prepared to discuss other areas as well: Montgomery, Manville, Bridgewater, Raritan, Branchburg, and Somerset - most of Somerset and Hunterdon counties!
Search available homes and townhomes for sale in Hillsborough on my Website (also available as a mobile phone application): CarolKronmaierHomes.com.
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