Isn't it always better to own than to rent?  This is the age old question and many Real Estate agents will tell you yes.  But this isn't always the case.  Instead, it depends upon your situation.  There are pros and cons to either option, and what is right for one family, may not be right for another.  At PRG, we only want to sell you a home if it is in your best interest to buy one.  Believe it or not, for many people, renting is still the best option.  Here are some things to consider before taking the plunge:

Are You New To The Area?

The tri-county area is very spread out.  A trip from Mt. Pleasant to James island could take you 30 minutes - or more with traffic.  If you are new to the area, it may not be the right time to buy.  Instead, consider renting for 6 months or a year until you can get a feel for the area.  Where are you going to work?  Where do your friends live?  Where will you like to shop, or golf, or go to the beach?  If you buy too soon, you could end up in an area of town that is not right for you.  Make sure you know exactly where you want to live before buying a home.

Do You Have Any Savings?

Buying a home can be expensive, and owning one can be even more so.  When you are renting, and your water heater explodes, you call your landlord.  When you own it, you have to pay to replace it.  Buying a home should be blessing, but if you buy a home with to no savings, it may end up becoming a curse.  Before you buy a home, make sure you have enough in savings to not only cover the downpayment and closing costs, but also enough to cover the ongoing expenses (taxes, insurance, upkeep) and any emergencies that might arise.

How Long Do You Plan To Stay In The Home?

If you plan to be in your home for 3 years or less, then you should strongly consider renting.  You may ask yourself, if I can get a mortgage payment for the same price as my monthly rent, isn't it better to buy, so I can build equity.  The answer, of course, is yes - but only over the long run.  If you do not plan to stay in your home for 3 years or more, the math actually works against you.

Why?  Several reasons.  First, when you buy, remember that there will be closing costs that you can never recoup, such as inspection and appraisal costs, title insurance, and paying the closing attorney.  Second, keep in mind that your mortgage payment will be amortized over 15 or 30 years, and that in the beginning years most of your payments will go to interest, as opposed to principal.  Finally, when it comes time to sell, you will have to pay some percentage of the sale price to your listing agents.

Because of this, you need to make sure that you will be in your home long enough for it to appreciate enough to cover these costs.  If you stay in the home only a few years, you may find that the money you have paid in closing costs and interests actually exceeds the amount you would have paid in rent over that time period.  If so, renting would make more financial sense.

When Buying Is Right

If you do have sufficient savings, know where you want to live, and plan to stay in your home for several years, then buying is a better option.  When you buy, at least some portion of your monthly payment (less in the earlier years than the later years) will be applied to lower your principal loan balance - allowing you to build equity in the home.  Moreover, the money that you do pay towards interest will be tax deductible.  Finally, you should expect some appreciation in your home value over time, meaning you are likely to be able to sell it for more than you originally paid to buy it.

Pros to Buying a Home:

  • Pride of Ownership
  • Long Term Appreciation
  • Mortgage Interest Deduction
  • Hedge Against Inflation
  • Flexibility (Re-Model; Own Pets, Etc.)

Cons to Buying a Home:

  • Costs of Repairs, Insurance, and Taxes
  • Coming Up With a Downpayment
  • May Not be Able to Sell Right Away if You Need to Move
  • No Amenities (Pool, Gym, Etc.)