As we’ve been reporting when it comes to real estate, this is a seller’s market — home prices are soaring. So that begs the question: should you buy or rent?
Keri Thorpe and boyfriend Brendan have been renting this two bedroom pet friendly apartment for the last two years.
But when the pandemic hit, they had to re-assess.
“We have three animals so it definitely got cramped pretty quickly,” said Keri. “We love it a lot,” said Brendan. “It’s just that we definitely feel like we’ve outgrown it a bit.”
Now they’re debating their next move: to rent or to buy?
“We want to be able to take advantage of the low interest rates and all of the benefits of purchasing right now, but then there’s also houses that are a little bit inflated with the prices,” said Thorpe.
An intimidating decision anytime but especially now.
While home listings are down 37% from last year, the amount of potential buyers is up 53%.
Meantime, there are more available rentals in almost every region of the country compared to 2020.
“We’re putting money towards rent that we could be putting towards a mortgage and really setting our futures up for more success,” added Thorpe.
So what should you do?
Million-dollar listing star Fredrik Eklund has some advice.
First question: how long do you plan to stay?
“Sometimes it does make sense to rent because you’re not really sure where you’re moving your situation,” said Eklund. “Sure, rent. But if you sort of know where you’re going in life and where you’re going to live, I would say jump into the market now. Lock in that interest rate now.”
Next, what can you really afford?
“It’s important to put down at least I would say 20 – 25%, every bank and every situation has its own requirement, of course, but try to put down as much as you possibly can.”
A good rule of thumb: your house payments — that’s your mortgage payment including things like property taxes and homeowners insurance — should not exceed 25% of your monthly take home pay.
Keri and Brendan decidED to take the plunge.
“We just put our first offer in on a house about three weeks ago,” Keri said,” and we quickly became outbid and did not end up getting the house.”
Extending their current lease for a shorter period — until they find the house they want at a price they can afford.
If you want to buy, the most important thing to consider is your finances.
You want to make sure you have at least six months of emergency savings set aside, and that your credit is in a good place — and make sure you are planning to stay in that home at least for five years. Especially with prices at these record levels because they can fall a bit.
You want to be able to ride that out so that if you need to sell, you can sell when the house is higher in value than when you purchased it.
When it comes to renting, there are plenty of benefits.
It’s flexible, if you don’t know what your long-term situation is going to look like, trying out something before you make that long-term commitment can make sense.
Many times, it’s cheaper than buying.
Often, your maintenance costs can be lower and you’re likely to have lower utility payments.