Is Buying a Home Worth It? What You Need to Consider

worthwhile buying a home

Is Buying a Home Worth It? What You Need to Consider

It’s not news that buying a house is a big financial investment. But many first-time buyers wonder if buying a home is worth it. They wonder how long it will take before breaking even compared to renting. The St. Louis region actually has one of the shortest break-even times in the country. 

According to a study done by SmartAsset, a financial technology company, the average break-even time for St. Louis is 3.6 years. That’s great news for aspiring homebuyers, especially when compared to San Diego (8.6 years), Seattle (14.9 years), and New York City (18.3 years).

But a favorable break-even point is just one factor to consider when deciding whether to rent or buy. Individuals must explore all of the pros and cons before leaving their lease behind and jumping into homeownership.

Signing a Lease vs. Signing a Mortgage Agreement

If you were to choose whether to rent or buy based solely on what it costs to move in, renting would win, hands down. Once renters pay an application fee, a security deposit, and the rent itself, they’re in. After that, they are on the hook for monthly rent, renter’s insurance (which is optional but always a good idea), and possibly utilities, unless they are included in the rent.

The home buying process is much different and much more expensive. Upfront costs include a downpayment (the bigger the better), mortgage fees, and closing costs. The future will include mortgage payments, mortgage insurance, homeowners insurance, property taxes, and ongoing maintenance and repairs. 

Even with all those other initial costs, buying is typically worth it, especially in a place like St. Louis. Monthly mortgage payments are usually much less than monthly rent. So over time, renters are paying more in total. Remember that break-even point: As long as the homeowner plans to stay in the home for longer than that period, buying is a better deal.

Renters might avoid the big payout that homebuyers have to make, but they have little to show for the money they spend. Sure, they have somewhere to live, but they aren’t building equity and won’t get anything when they move out.

Homeowners have a tangible piece of property that they can live in, sell, rent out, or pass on to their children. They will get the proceeds from selling the house, if and when they decide to leave. While living there, they will also get the tax benefits of being able to claim their mortgage interest, insurance, and property tax costs.

No More Landlord

money spent on buying a house vs. renting

Giving up renting to buy a house is a tradeoff when it comes to repairs and maintenance. In apartments or condos, someone else takes care of the upkeep like landscaping, painting, and keeping common areas clean. If you’re renting a house, you might be expected to handle some things, for example mowing the lawn, but for the most part, maintenance is not your responsibility. 

And if something breaks or needs replacing, the landlord or the building management company will take care of both the expense and the labor. Unfortunately, some building managers are more responsive than others. Renters have very little to say about when repairs happen or the quality of the work. 

Repairs and maintenance can be both a pro and a con for homeowners. Owners bear the burden of fixing things themselves, or paying someone else for repairs and improvements to the property. On the other hand, they have complete control over what gets done and when.

With the exception of neighborhood homeowners associations with strict rules, owners are free to do whatever they want to their property. Renters are lucky if their landlord will let them paint the walls their preferred color, let alone knock out a wall, remodel the kitchen, or put in a skylight. 

Landlords typically have a list of rules about conduct aside from those about the physical property. Rules might cover things like where you can park your car, if you can grill on your balcony, and if you’re allowed to have long-term guests. They may enforce quiet hours or prohibit pets. And most leases allow the landlord to enter a dwelling if they see fit. Living as a renter means giving up a certain amount of autonomy and control. 

One big reason why homeowners think buying a home is worth it is the chance to create the home of their dreams and live how they choose. 

Lifestyle of Homeownership

People who decide to buy a home will often see a shift in their lifestyle. Once a renter pays rent each month, they can save or spend their money however they’d like. Homeowners may find that any extra money they have ends up going into the house. But there’s a tradeoff with the peace of mind that they are building equity and their home’s value will likely increase. Some people might not be at the point in their life when they’re ready to “settle in” to buying a house. Renting might be best until they’re ready for the responsibility.

In some cases, buying a home can be more financially predictable than renting. With a fixed-rate mortgage, monthly payments will stay the same. There is always the possibility of unexpected costs or emergencies. In most cases, though, a family can budget their routine costs and save up for future projects like new appliances or remodeling.

Renting is reasonably predictable, but there’s still a bit of uncertainty. There is no control over the neighbors, and a bad one could make living conditions unpleasant. Landlords can raise the rent—and some do it every year. They could also decide to sell the property. Rent could increase dramatically, or the property could deteriorate under new ownership. In some cases, owners turn the building units to condos, forcing renters to either buy or move.  

Moving Out

Finally, something to consider when deciding if buying a home is worth it is what happens when you decide to leave. 

Renters have an advantage. They can pick up and leave at the end of a lease for any reason. If they want to move sooner, they may have trouble breaking the lease. But they may be able to sublet the apartment or come to an agreement with the landlord.

Homeowners must go through the process of preparing their house for sale, putting it on the market, and finding a buyer. This can sometimes take a long time and a considerable amount of money. The house may need certain things fixed or updated before it is ready to sell. They will work with a real estate agent to come up with the best asking price. If the market is in their favor, they will find a buyer, but it might take a while. 

But unlike renters, homeowners have an asset to sell. In a favorable housing market, a well-maintained home will increase in value. The proceeds from the sale will give the homeowners an advantage in buying their next home. And if they’ve been diligent about making their mortgage payments, they have the added bonus of a boost in their credit rating.

For many people, there comes a time when landlords, restrictions, and too-close neighbors become tedious. It may be time to take the plunge and start house-hunting. When you’re ready, contact Berkshire Hathaway HomeServices Select Properties. Our real estate professionals will help you find your dream home....the one that will have you answering “yes!” to the question “is buying a home worth it?”

Previous PostNext Post