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Buy or Rent in 2015?

Karen Gibbs

mortgage calculatorHi Karen, I’ve been renting for a while as I watch the housing market recover.  What are your thoughts about buying or renting for 2015?
    Maurice, Federal Hill

Maurice, Happy New Year.  2014 saw an uneven recovery for the housing market.  Hurt by a brutal winter, home sales started off slowly.  A pick up in demand caused mortgage rates to rise, tempering demand.  So buyers and sellers are cautious going into 2015.  Home sales usually pick up in February and into the spring, so you’re in the sweet spot in terms of looking at price and mortgage rates.

But there is more to the decision than price and interest rates.  Are you planning on staying put for the next five to ten years?  How about your job security?  Is there a chance you may change jobs or locations?  What’s the rental market like in your neighborhood?  Are rents rising or stable?

Do you want a single-family home, duplex or a condo?  Have you pre-qualified for a mortgage to see how much of a home you can afford?  Can you afford the homes available in your desired location?  How far will you have to travel to work?  Do you want a newly constructed home or an older home?  Are you prepared for the updates and repairs that an older home may need?

Mortgage lenders have tightened their lending criteria.  Are you comfortable with your credit record or do you need to do some work to raise your credit score? To get the advertised mortgage rates, your credit score must be above 730.

There are many benefits to owing your own piece of the rock.  Your home is first and foremost your shelter.  Owing a home offers tax relief as mortgage interest is deductable on your federal income tax return.  Over time, you can build equity in your home, equity that you can tap for emergencies, if needed.

Homeownership also offers peace of mind.  When you pay of the mortgage, you (or your estate) own your home outright.  The real estate taxes you pay make you an invested member of your community and, best of all, you answer to no one but yourself.

Renting is generally cheaper than buying a home, with lower monthly payments.  If you want or need to move, it is much easier when you rent than when you own.  When you rent, repairs are someone else’s headache; when you own, something is always in need of repair.

Once you’ve answered the questions of how long you plan on staying put, how much home you can qualify for and have banked the savings needed for a down payment, you need to crunch your numbers.  There are many sites on the internet that will let you calculate whether it is more advantageous to rent or own.  Look at one example here

Whatever your decision, Maurice, make sure you’re thinking smart about your money. Consider your budget and don’t put yourself in financial peril.  Good luck!

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