Not Everyone Fits Into The Same Mold.

Most people will rent living space at least for a while.  Some will choose to always rent….for varied reasons.  After all, buying a home isn’t for everyone.  Figure which mold you fit in.  Whether you rent or purchase, homeowners/renters insurance, renewable annually, is a must.  It covers your possessions, in case of fire, theft, or other disaster.  You will receive a policy with proof of coverage and dates of same. Read it carefully,  There’s small print and many exclusions. if any questions, ask.  This is an important document.  Keep it in a safe place.

Sometimes the cost of rent is just that…the cost of the space.  Or it can include utilities, heat, hot water. Know which you’re paying for…although you shouldn’t be wasteful either way, if you’re paying utilities on your own, you’ll receive a monthly bill for each utility.  If so, these are things you can easily reduce, by turning down heat/AC when not at home, turning off lights when not in use, and not letting hot water run unnecessarily.  Common sense savings.

Although renting usually costs more monthly, it works best for some.  It means when something breaks, you call the landlord, there is no outside maintenance for you.  A plus for many. The downside, when you pay your rent, it’s gone, you don’t see any part of that money again.

Buying a home means you need a ‘down payment’…. usually 20% of the cost of the home.  It can be purchased with less of a down payment, but if so, mortgage insurance is required, and is paid each month until you have made mortgage payments which equal 20% of the cost of the home.  This can take years, and it adds to the monthly cost.  It is why, although it will take longer before you buy, saving up for the 20% down payment is a better idea. Adding to the 20% down payment, there will be legal costs at the closing.  Do your homework first so there won’t be any surprises at closing.

Although buying has the initial expense, the mortgage is usually cheaper than renting, and a portion of your mortgage payment…a small amount at first but it grows… will go into an equity account each month….for you.  If you own, you replace, repair, and maintain inside and outside the property. If you sell, any gain over the original cost as well as any equity accrued will go in your pocket.

This 20% is what holds many back from purchasing even if it’s something they’d like to do.  It is why budgeting and saving is so important, adding yet another specific savings account to add to your budget.

Whichever you decide, for whatever reasons you do, your rent or mortgage should not be more than 1/3 of your monthly income….because you don’t want to become ‘House Poor’.