Donna Fessler's Blog
The rent vs buy dilemma is something that Americans have been facing for decades. Both options have their benefits, and it’s really a matter of timing and preferences when it comes to choosing which is best for you.
However, there are a lot of things to consider before making this decision. So, in today’s post we’re going to break down some of the benefits of renting an apartment and of buying a home. That way you can make your decision with a clearer picture of what each situation looks like.
One thing to note first, however, is that it isn’t always as simple as buy vs rent. Some living situations draw on the pros of each type of living. For example, living in a condo might be a good option for people who want the privacy and independence of owning their own home, but who also don’t have the time or desire to keep up with maintenance.
So, as we compare buying and renting, keep in mind that the features of each are not mutually exclusive.
Renting an apartment
Most people who are living on their own for the first time start off renting. For younger people just out of school, renting offers the first taste of independence without the prerequisites of homeownership.
When you rent your first apartment, you’ll learn the skills associated with budgeting for your monthly expenses, making your rent payments on time, and will start learning some of the skills that it takes to run a household.
In terms of monthly costs, apartments can vary greatly. Depending on where you live (and how luxurious the apartment is) you could end up having rent and utility payments that are much lower or much higher than mortgage payments for a house.
However, apartment leases often come with the benefit of utilities, trash removal, and other expenses built in. They also typically require the landlord to maintain the apartment and the land it sits on.
Live in the northern part of the country and hate shoveling snow? Make sure your lease specifies that your landlord will provide snow removal.
One technique that many renters take is to find an apartment that is small and affordable while they save up for a home. In this case, it’s worth living with fewer amenities if your end goal is saving for a down payment.
But, what if you want to own a home someday but haven’t quite decided where you want to settle down? Maybe your work keeps you moving from place to place or you’ve always wanted to move away to somewhere new.
Renting is typically a better option for those who aren’t quite sure what their plans are for the next coming years. They can have a stable place to live while they figure things out and plan their next move.
Buying a home
Once you’ve rented a home for a while, you might become increasingly aware that you want more space and more control over your home.
You’re also likely noticing how much money you spend on rent each month that is essentially a net loss.
When you buy a home, your mortgage payments might be going to the bank, but someday the money you’ve paid toward that home will be yours in the form of equity. You can then use this as a down payment for another home.
This financial benefit cannot be understated. Since house values dependably increase over time, owning a home is a great investment toward your future.
So, those are the main pros and cons of renting vs buying a home. Think about your circumstances and determine which one makes the most sense for you right now. Then, start planning for the future.
If you’re retired, own your own home and have trouble making ends meet, a reverse mortgage may seem like the answer to prayers. You get to stay in your house and you’ll have some extra cash to see you through. Before you run to the nearest lender, however, consider the downside as well as upside to these instruments.
What is a reverse mortgage?
A financial institution lends you money, either a lump sum, a stream of payments or a line of credit, against the equity in your home. Unlike most loans, however, you’re not required to pay it back on a regular basis. You can let the loan ride until you die, move or sell the home, at which your home is sold and the proceeds pay off the loan.
While there are several flavors of reverse mortgage, most are insured by the Federal Housing Administration (FHA) under a program called the Home Equity Conversion Mortgage (HECM).
Am I eligible for a reverse mortgage?
Everyone on the title must be 62 or older. The home must be your primary residence, and your equity needs to be at least around 50 percent. Also, you have to attend consumer counseling before signing up.
What are the pros of a reverse mortgage?
You stay in your home. You keep the title until you sell, move or die.
There are no required monthly payments. Any previous home loans are paid before you receive your proceeds.
If you choose to make payments, there’s no prepayment penalty.
The money you receive is not taxable, nor does it affect your Social Security or Medicare eligibility.
The loan is non-recourse. Regardless of your loan balance, you'll never have to pay back more than the house is worth.
What are the cons of a reverse mortgage?
Unless you make payments, the loan amount will continue to increase. It’s unlikely you’ll pass the home on to your heirs.
You must continue to pay taxes, insurance and necessary maintenance and repairs. Failure to do so can lead to foreclosure.
There are upfront and ongoing mortgage insurance premiums as well as a loan origination fee. These (and interest rates) trend higher than for other mortgage loans.
Your favorite bank may not offer reverse mortgages. Most issuers are small banks, credit unions and online lenders. Some lenders have made misleading claims that understate the risk.
If you go into a nursing home you will have to sell the home and pay off the loan.
While Social Security and Medicare are not an issue, reverse mortgage income can affect your eligibility for Medicaid and Supplemental Security Income.
Should I apply for a reverse mortgage?
If you plan to stay in your home well into retirement and are having trouble with ongoing expenses, it may be right for you. However, if you aren’t cautious about what you’re getting into, or if you’ll have trouble paying taxes, insurance and upkeep even with the extra money, it isn’t a wise choice.
In a seller's market, buyers often wonder how they can edge out other interested parties and make their offer more appealing. There is often the tendency to forgo some protections that homebuyers have on their side in an effort to make things easier for the seller. One of these might be the suggestion to skip the home inspection.
Home Buyers Should Opt for a Home Inspection
Opting for a home inspection is always a good idea. Most sellers won't hold this against you and many even expect you to have one done. If you don't, then you are relying solely on what the seller tells you about the condition of the various systems within the house. While some sellers might not know that anything, in particular, is wrong with the home, it is not always required that known issues are disclosed at the time of sale. That's why it's important to get an objective and professional opinion from a third party.
What To Expect During a Home Inspection
It's important to understand that the home inspector will evaluate both the exterior and the interior of the home. While every inspector is different, you should expect them to complete the basics such as assessing the insulation in the attic, inspecting the eaves and the roof, flush the toilets and turn on all the faucets, check the fuses, switches and electrical outlets and more.
What you should not expect your home inspector to do is to rip up the carpeting or knock a hole in the walls. These actions are simply beyond the scope of their job. That being said, many home inspectors can provide you with their best guess regarding what's behind the walls and under the current flooring. Chances are your home inspector has experience working with homes in your area and can read the clues that are found in the home.
Home Inspection Pointers to Consider
It's important to be present during the home inspection. This will allow you to hear everything that's said about the house firsthand. You'll also be able to ask any questions right then. The inspector will provide you with a written report afterward as well.
Be sure to take what is found by the inspector seriously. If there are issues with the home, it's time to assess if it's the right one for you. You can also try to negotiate with the homeowner. This could involve you asking the owner to fix the issues first or for money so you can do so yourself.
Tired of the same old hardwood floors and vinyl siding? So are the designers of America's building materials. New, improved materials are becoming readily available every day. They're more sustainable and they last longer than materials of old. Not surprisingly, they look nice, too. Three of the best we've found so far include roofing made from porcelain tiles, cork flooring that comes on a roll, and a new style of brick that looks anything but.
What's resistant to frost and fire and withstands wind gusts of up to 110 mph? If you choose wisely, it could be your new roof. One of the newest building materials on the market is Perennial Porcelain Roofing by Daltile, made from the same type of porcelain that's been protecting kitchen floors for decades. Perennial roofing has a lot going for it, including:
When you opt for a porcelain-tile roof, it may very well be the last one you ever need.
Is it cork? Is it linoleum? When you install new Corkoleum flooring, you'll get the best of both materials. Corkoleum comes on a roll, just like linoleum, but it looks like cork. Various textures are available, and you can have your Corkoleum flooring dyed to fit any decor. Corkoleum has great advantages over other forms of flooring, such as:
If you're looking for something new and comfortable in residential or commercial flooring, consider the many advantages of Corkoleum.
Old Brick House
Old Brick House is a new style of brick that's been specially manufactured and tumbled to look like the hand-hewn bricks our ancestors once used. Created by Pine Hall Brick, Old Brick House features “intentional imperfections” and color variations to give every home a unique, artisan appeal. There are currently four styles of Old Brick House and each is named after -- you guessed it -- an old brick house:
Each house is a real, colonial structure that still stands in Massachusetts, New Hampshire, Connecticut and Virginia today. And now your new home can mimic that same, heirloom appeal when you build it using a style of Old Brick House.
If you're in the market for a new construction that you can design from the floor joists up, you're going to love all the modern options in innovative building materials available. Tomorrow's building materials are out there right now, just waiting to change the way you think about home design.
The perfect home is not the only thing you'll need to shop for when you want to become a homeowner. In order to get the best terms, the lowest monthly payment and a reasonable interest rate, start doing some homework now -- before you even attend your first open house.
1. Check Your Credit Score
Checking your credit score should be the first thing you do when you're considering the purchase of a home. Why? Because every lender you speak to will use it as a benchmark for determining the likelihood of you being able to pay off the debt. The better your credit score, the more favorable terms and interest rates a lender might offer you. The earlier you know your credit score, the more time you have to address any issues that might be contained in it. Remember, you're entitled to one free credit report from each of the three reporting agencies each year. Take advantage of this service and keep tabs on your credit score.
2. Have Steady Employment
Being able to demonstrate that you are gainfully employed will go a long way toward qualifying for a mortgage loan and being offered attractive interest rates. Aim for at least two years of unbroken employment. Be ready to back up your claims regarding the duration of your employment and the dollar amounts you bring home.
3. Offer a Sizable Down Payment
Come to the negotiating table with a lender and with a solid down payment, you'll be able to enjoy lower monthly payments. There's no fast rule regarding the amount of a down payment. That being said, most lenders like you to have at least 20 percent of the home's purchase price as the down payment. There are some lenders, however, who accept less than 20 percent. If your lender accepts down payments that are less than the standard 20 percent, expect to have to purchase private mortgage insurance. This can be anywhere from .05 percent to 1 percent.
4. Know Your Debt To Income Ratio
The debt to income ratio demonstrates your ability to pay off the mortgage as agreed upon. Most lenders like to see that your monthly debt payments are equal to or less than 43 percent of your gross monthly income.
In a seller's market, there might be several people vying for the same home. Addressing the items above can make you look more attractive compared to some of the other potential home buyers.