Should you rent or should you buy a Metro Detroit home?
This is the first in my series for Wayne, Oakland, and Livingston County homes buyers. Whether you are a first time home buyer or an experienced home buyer this series of “HOW TO BUY A HOME by Russ Ravary” will help you in the long run. I am going to explain the ins and outs of home buying in Metro Detroit. This will help you understand the process and keep you from making a mistake.
So let’s delve into whether you should buy or rent? There is no quick and simple answer to the question “should I rent or buy a Metro Detroit home?” The answer to the question depends on where you live or want to live in metro Detroit, the costs and savings, and of course your personal preferences.
Renting a home has become more costly over the years as many landlords keep raising rental prices. Many times the rental homes are not that nice. I think that will continue to be a trend of the future. Here are some of the reasons people continue to rent.
- Renter cannot afford the down payment and closing costs. Many times the buyers just can’t scrape up the down payment or the closing costs for a home. They may not be able to get any financial help from their families either.
- ….the cost of renting a particular place is cheaper than buying the home they want. Taxes, insurance are some of the costs that you will incur when maintaining a home
- Renter may not be able to afford the area that they want to live in. Housing in cities like Birmingham or Bloomfield Hills cost more
- Freedom – some renter like the freedom of not cutting grass on the weekend, or taking care of the building.
- No commitment other than a year long lease. You are not tied to the rental home after the lease ends.
- No responsibility – renters never have to incur the costs of major repairs or appliances when they break down
- No unexpected costs. When something breaks down when you buy a house you have to pay to get it fixed whether it is the furnace going out or a roof leak.
What I definitely advise to any potential home buyer is that you get your finances in order before you buy. There are fewer routes to financial ruin faster than taking on too much of a housing payment and killing your budget until you need to borrow money just to keep up with monthly expenses. Never over buy unless you expect your family income to go up.
The #1 mistake I see new home buyers make is to fail to appreciate just how much owning a home costs (in addition to the mortgage, property tax, and insurance). It also costs money to maintain the home over the years. I hate it when home buyers have to sell in a couple years because they cannot afford the house. I want to help you from making that mistake.
Here are a couple of terms and explanations that you should know and will see below.
Principal —–The principal is the amount of money you borrow when you originally take out your home loan. To calculate your principal, simply subtract your down payment from your home’s final selling price. Principal (the amount you owe the bank) goes down with every payment
Equity is the difference between what you owe on your mortgage and what your home is currently worth. Your equity goes up each time you make a house payment and when your house goes up in value.
Here are some of the reasons Metro Detroit home buyers chose to buy over rent.
- You get a home of your own. You get to paint it and change the house to match your personality, your wants, and desires. Nobody can tell you “NO you can’t do that” Unless you go outside city regulations. But other than abiding by city laws your house decor is all about you. It’s your house to do at you please.
- Savings – Tax deductions are available for the interest you pay on the mortgage and the taxes. So owning a house can save you money in the long run. Rents are always going up. You have a little control of payment costs when you own your own home
- Equity – You are going to have something to your name. A home is usually one of the biggest assets a person has later in life. You basically enter into a forced savings plan when you buy a home. Each and every month a portion of your payment decrease the amount you owe and builds your equity in your home. If you do not know what equity is….here is an explanation of home equity. Equity is the difference between what you owe on your mortgage and what your home is currently worth. So every time you make a payment you are paying down the mortgage and increasing the amount of money you have in the house.
- Increase in value. In most instances over time your home should increase in value. That’s what you want. That is why you want to buy in stable or better communities.
Sometimes when comparing renting versus buying renting seems better in the early years because of the costs. The positives of buying a home multiplies as the years go on. Sure you can just up and move when your lease is up, but when you are in your 50’s and 60’s and you see the equity you will be glad you bought.
You aren’t going to see huge increases in equity the first few years. But buying a home is more like “a marathon instead of a sprint”. As time goes on the amount of interest goes down and more money goes to your principal. The longer you stay in your home the more equity you build.
I myself believe that there is no real choice when it comes to buying or renting. When you buy a home you are going to be in a better position later in life than a person that rents. You will have equity in your home that you can cash out when you sell. Can you imagine having an extra $200,000 to $500,000 because you owned a home instead of renting?
If you need help or have questions on your next move feel free to call or text me anytime. My cell is 248.310.6239
Your local metro Detroit Realtor that helps save you money.
Here are a few of my past articles that you may like Explanation of what “owner occupant buyers” mean – Northville real estate talk
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