Most of us have wondered whether renting suits our purposes or buying a home in Middle Tennessee would be a better choice.
Unfortunately, there’s no one-size-fits-all answer—every situation is unique.
You can determine which is right for you with a candid evaluation of your financial circumstances (and maybe a little number-crunching).
Rent vs. Buy: What’s Right for You?
Let’s start with the number-crunching to get it out of the way.
If you’re currently renting, write down your monthly rent amount. Put a symbol next to it that reminds you that renting doesn’t build equity; you’ll never see any return on your investment except to have a roof over your head. If you stop paying on your rental property after 10, 15 or even 30, that roof disappears.
Now take out your calculator and multiply your gross monthly income by 0.28. According to Bankrate, mortgage lenders typically worry about whether you can make mortgage payments; they often assume that as long as your payments are below 28 percent of your gross monthly income, you’ll be able to do so.
If you make $4,000 per month in gross (pre-tax) income, $4,000 x 0.28 is $1,120. That means you could—theoretically—afford a mortgage payment of $1,120 per month. However, that amount needs to include:
- Your principal payment (the amount of your payment that actually repays the debt)
- Your mortgage interest (the amount of your payment that pays the bank for lending you the money in the first place)
- Your homeowner’s insurance
- Your property taxes
Assuming you’re happy with the number you got when you calculated 28 percent of your income, let’s look at your goals and consider other financial questions.
- Do you plan to stay in one place for 5 or more years? Will you be able to conduct or pay for routine home maintenance? Many homeowners pay about 1 percent of their home’s value each year in maintenance.
- Can you afford closing costs?
- Do you qualify for a special type of loan, such as a VA loan after military service?
If you’re sitting on the fence, start looking at Middle Tennessee real estate listings. When you are ready to buy, call me at 615-473-5973 or contact Mallard Property online. I’d love to help you find the perfect space.