So, you’ve been wondering – is it better to rent or buy your new home? Well, this is just the article for you.
To make it simpler, we have divided it into two parts – financial benefits and non-financial benefits. The financial benefits include, as you might have realized, all things finance – from not having to pay maintenance costs or repair bills, accessing otherwise expensive amenities, not having to pay property taxes or down payments, all the way up to allow for better and more secure budgeting options.
The non-financial list is a little more fun and includes the freedom you gain to travel and move around, the additional quality you can gain, and the much better and popular locations you can live in, places you might have not been able to reside in otherwise.
💡 Key Insight: Look at both the financial and non-financial benefits together
Additionally, we explore the financial commitment you have to make, and whether sometimes it may be better not to make the big investment as it has additional risks attached. Both renting and owning a place is a commitment, but in different ways and in different degrees. So, how exactly does renting beat out homeownership? And what factors come into it? Read on to find out 10 financial and non-financial benefits of renting a home that you should consider before making your move.
One of the biggest benefits of renting a home is that there are no additional maintenance costs or repair bills. When you rent a property, it is the landlord who is responsible for all maintenance, improvement, and repairs. This means that if an appliance stops working, or even if your roof starts to leak, you can just call the landlord and he is required to take care of it. Not only is this less hassle for you, but can possibly save you a lot, and we mean a lot, of money.
💡 Key Insight: The Landlord is responsible for maintenance and repairs
Another financial benefit of renting is having access to amenities that would otherwise be an enormous expense. If you enjoy luxuries such as a fitness center or an in-ground pool, but do not have the money to afford them yourself - considering not just the installation costs, but also the maintenance costs, then renting may be the answer for you. Many middle scale to upscale apartment complexes include such luxuries without any additional charge to tenants. Such luxury is likely to be unavailable even to condo owners, who would need to pay monthly fees for access to them.
Another significant financial benefit is that you, in comparison with home owners, do not have to pay property taxes. The rate of tax varies county to county, and is based on the estimated property value of the house and the amount of land, but can sometimes reach up to thousands of dollars annually, which can be a costly expense to some home owners.
Lenders generally require renters to pay a security deposit, usually worth as much as a month’s rent, when it comes to upfront costs. If the renter has not damaged any rental property, the deposit will likely be returned to them after they move out.
On the other hand, when it comes to purchasing a home with a mortgage, as most do, the initial down payment is likely to be around 20% of the property’s value. Of course, this also results in having equity in the home, meaning that the value of your house is likely to slowly increase as a result of all your investment.
This increase in the value of your house can renters never experience, however, if you do not have money for a down payment, you are likely to be, at least for now, better off renting.
One of the best things about renting is its financial security through consistent spending – each month you simply know what your rent is going to be. What is more, the majority of landlords offer long-term tenancies. This means that renters can also benefit from long-term consistency, with costs being pre-planned and maintained at the same level for the whole duration of the tenancy.
This is likely to have a very positive impact on your budgeting – each month you will have a fixed cost of rent, and the rest of your disposable income can be planned to suit the rest of your lifestyle. Homeowners on the other hand do not benefit from this security. Whilst the mortgage rate stays the same each month, and so does the service charge if you live in a block of flats, unexpected charges are simply just part and parcel of owning your own home.
The maintenance costs will vary, depending on what is broken, and are almost an endless list of possible additional costs, such as:
All these would be covered under your rental contract, but when you have your own place, it is all on you. So, in this case, really take into account the disposable income you have and whether it would not be more beneficial to have all such unexpected costs covered.
💡 Key Insight: The top financial benefits of renting are access to amenities, no down payments on a house, and a clearer insight on your monthly costs-which relates to an simpler way to budget.
Now that we’ve covered all the financial benefits, let us explore the ones that cannot be paid for. And amongst these is first in line flexibility, which is simply unmatchable by owning a home. Most rental contracts are around 12 months long, which means that if you want, you could change a home every year.
This provides unmeasurable freedom – you can explore new parts of the city, the country, or move abroad! Additionally, you can experiment with different apartment layouts, decorations, and price points to find the best choice for you. Not to mention, you will not be weighed down by mortgage payments and can hand out your notice almost any time, depending on the contract type.
This a point that adds to the access to amenities. Essentially, renting has the possibility of giving you a home of a better quality than you could afford to buy. Let us illustrate by an example. If a person with an annual household income of $80,000, which is double the average salary in America, wanted to find an apartment in Brooklyn, New York, he would generally struggle to find any place he could buy which was liveable.
If he was renting, however, he could afford a large apartment of a high standard, possibly even with luxuries in the building, such as an in-ground pool or a fitness center. Therefore, if the quality is what you are searching for, renting may just be the right option for you.
Additionally, renting allows you to live in more sought-after places than buying would likely do. Let us stick to the London example. Take for example Benthal Green, an area of London within walking distance of East London’s iconic Brick Lane or the vibrant Shoreditch, and only minutes away from Oxford Street by subway – long story short an incredibly popular near-centre area.
If you wanted to buy a home there, the average price fluctuates at about £536,000, which is – at least to most – far too expensive (unless you have £110k sat in your bank for a deposit of course). Renters do not have the same price barriers. Average rents in Bethnal Green are at about £1,900/month, a significantly lower price in comparison. This price difference opens doors for a whole new range of residents, who can now afford to live in a popular London area they might have not otherwise.
Buying a home is an investment, and as with all other investments, it carries risk attached. When your home is rented, you do not need to worry about the market crashing and putting you under water on your home, or that you will have to pay a costly home repair which will wipe out your whole savings account, not to mention not having to worry about whether your home is gaining or losing in value, in case you will be selling it later.
The biggest risk of renting is usually just how happy you will end up being with the home you chose, and that is a risk most of us are willing to make.
💡 Key Insight: The non-financial benefits can be as simple as peace of mind, being that there is less risk attached than owning the property. Also. depending on your income--renting enables you to be in a more desirable location.
Small things such as chipping paint or yellowing grass are obviously far from being the end of the world. However, admittedly, they can still ruin your day, and as they pile up with time can actually make house owning a big responsibility. When you are just renting your place, you do not have to think twice about any of these.
So, if your chosen Sunday plans involve hanging out with your friends or reading with a glass of wine, rather than climbing up a ladder and clearing leaves out the gutter, then renting may just be the better option for you.
Over time, you build equity in your house, which allows you to apply for a home equity loan or home equity line of credit (HELOC). Whether you will pay for renovations, student loans, or something completely different, an equity loan is a great way for you to have access to money, without having to drain your savings account. In this article, we’ll explore all the nitty gritty that goes into the process, from its length to what the process entails.
We’ve included an outline of the process for anyone wondering – however, again, for the specific details it is best to consult your lender directly.
Unfortunately, there is no single answer to this question – if you ask various lenders, you’re likely to get a different answer. The truth is that home loan equity approval can take anywhere from a week to up to two months in some cases. The average time, however, tends to be anywhere from two to six weeks, with most closings done within a month.
As mentioned already, each process is individual and therefore you need to keep in mind its flexibility. The actual length will rely on many factors, such as your home valuation and the underwriting process. Therefore, it is best to ask your lender directly, as they will have the most accurate information.
As mentioned above, there are several factors that can either speed up or slow down your home equity loan application process. It is not a rare occurrence that closing dates get pushed back in order to allow for extra time to review more documents, finish the appraisal step, or even the underwriting process. As such, you have to have patience and keep in mind, that some factors may simply be out of your control. Here are the most common factors adding extra time to the home equity loan process and tips on how to avoid them:
If you buy a house with a mortgage, the lender will look at your credit history and use your score in a particular range to determine whether you can get a loan or not. If your score falls below a specific point, the lender will deny your application. The credit score that most lenders use is the FICO score, which ranges from 300 to 850.
Do you need good credit for buying a house? The short answer is yes and no. But we will get more into this because that is not a good answer is it?
A score above 780 is considered good. However, you do not have to have excellent credit to buy a home. In fact, many people with good credit scores still get turned down for a loan. That's because your credit history and score are only part of the equation.
Other factors can also influence whether you are approved for a mortgage. Your income and the amount you want to borrow are two crucial factors. If you do not earn enough or want to borrow too much, you might get denied no matter how good your credit is.
These are all factors that can affect your approval:
If you are declined for a loan, there might be things you can do to improve your score and get approved. For example, if your debt-to-income ratio is too high, you might consider paying off some of your debt.
If your credit score is in the mid-500s, you might have options at alternative lenders.
If you have a low credit score, it's best to start by making sure there aren't any errors on your credit report. If there aren't any errors, you can focus on paying off debt and building credit.
Here is an overview of our list "Do you need Good Credit for buying a house"
As you see we are going to cover many different aspects of our list "Do you need Good Credit for buying a house".
First on our list "Do you need Good Credit for buying a house" is the all to common bad credit
If you have bad credit, you might have a hard time getting approved for any type of loan. You most likely need to pay a higher interest rate, which will make it more expensive to buy a house. If you are able to buy a house, you will probably need a cosigner.
A cosigner is someone who agrees to be responsible for your loan if you default. Your cosigner's credit history will be taken into account when lenders decide whether to give you a loan.
If you can buy a house with bad credit, the lender might also give you a shorter loan term. That way, if you have trouble making your payments, you will not be stuck with a mortgage for 30 years.
If you have bad credit, there are a few things you can do to improve your credit score. First, make sure you are paying all of your bills on time. If you have a credit card, try to pay it off in full every month. You can also try to get a secured credit card.
With a secured card, you deposit money with the credit card company. That money is used as collateral for your credit card. It will help you build a credit history, and you will be able to use the credit card to make purchases.
Second on our list "Do you need Good Credit for buying a house"is what do you do if you have no credit?
You are able to buy a house with no credit score. There are two ways to do this. One option is to buy a house in cash. The other is to buy a house with the seller financing the purchase of the home.
What that means that the seller will give you the money for the down payment and will have you pay him instead of a bank. Alternatively, you can look if you qualify for any of these:
A VA loan is a mortgage loan that is guaranteed by the Department of Veterans Affairs. It is a great way for veterans to buy a home. The VA loan has a low down payment and a great interest rate. It is a great way to buy a home if you qualify for the loan program.
A Federal Housing Administration (FHA) loan is a mortgage loan insured by the Federal Housing Administration. The FHA makes loans to home-buyers who meet the requirements for FHA-insured loans, which are the most lenient of the mortgage loan programs.
FHA loans require a minimum down payment of 3.5 percent as opposed to the 20 percent required by other mortgage loans. The FHA also requires the borrower to pay mortgage insurance for the life of the loan, which protects the lender from losses in the event that the borrower defaults on the loan. The borrower pays the mortgage insurance premiums.
An FHA 203(k) loan is a mortgage that allows homeowners to finance both the home purchase and a wide range of home improvements and repairs into one mortgage loan. The 203(k) loan is a great option for homebuyers who are looking to purchase a home that needs repairs.
The 203(k) loan is used to finance both the purchase and the repair of a home.
The loan limits for a 203(k) loan are the same as the limits for a conventional mortgage loan.
Third on our list "Do you need Good Credit for buying a house" is can you still buy a house without money down?
If you have no money, you might be able to use a cosigner. It's possible to buy a house with no money down. If you want to buy a home with a mortgage, you can pay for your down payment with a gift from family members or a gift from a charitable organization.
It's also possible to buy a house with no money down if you buy the property using a land contract. In a land contract, the seller gives you the deed to the property after an initial payment. You then make monthly payments until the balance is paid off. The seller retains ownership of the property until the end of the contract. A land contract can be also called a contract for deed.
If you have no money for a down payment, you might be able to find a seller who is willing to use a land contract. The seller will probably require you to pay a higher interest rate, and the monthly payments will likely be higher than those you would have to make with a traditional mortgage.
Fourth on our list "Do you need Good Credit for buying a house" is what if you have no money?
You can buy a house without money at all if your family or friends help you to pay for your down payment. However, if you don't have any money you should probably not think about buying a home in the first place.
Last on our list "Do you need Good Credit for buying a house" can you use a credit card to buy a house?
You cannot buy a house with a normal credit card. You might be able to use a credit card to make a down payment on a house. For example, if you put $10,000 on a credit card, you might qualify for a loan with a $100,000 balance.
You could use a credit card for a down payment if it has a low-interest rate and you pay off your balance in full every month. Normally you should never use a credit card to make a down payment. If you do, you'll be charged interest if you are not able to pay off the balance at the end of the month.
We have hoped you like our article "Do you need Good Credit for buying a house". This article was made for educational purposes only and you should consult a professional if you need to know more.
Is there something else you would like to add to our list "Do you need Good Credit for buying a house"?
A fast answer to the question, "Do you need Good Credit for buying a house" is it is easier if you do. Then you will not have to take a riskier alternative approach.
If you are in the market for buying a house then check out our tips on making a offer on a house!