Should I Buy or Rent

    Many people looking to buy a home will ask themselves if they should buy or rent.  Because the question covers the two most common options available for anyone looking at housing in the United States the answer is not nearly as clear-cut as TV has made it appear.

    Two key decisions to consider when looking to buy your first home and they are how long you plan to stay in the same house and how much you have to invest in your home compared to the interest rates.  The second part of this is slightly more complicated in that it examines the effect of your downpayment on the equity of your home and is beyond the scope of this post.  I recommend speaking with your lender about the different options in Adjustable Rate Mortgages, Fixed Rate Mortgages, and buying points vs. down payments to see what is your best financial choice.  But even when you talk to your lender they will ask you, how long do you plan to stay in your home.

    Each market is going to be different so listening to the advice of your friend who lives in California may not be the best idea when you live in Columbus Georgia, so it is essential to know what the local market is doing and compare the rising housing market with costs of selling.  The easiest way to think about this is you spend roughly 10% the value of the house to sell the home when you decide to move, so on a $100,000 home; you will pay approximately $10,000.  When you own a home, a portion of your monthly housing payment goes into equity which should come back to you when you sell your home.  This amount will change based on interest rates and terms of your loan so we will talk in generalities.

    To understand if it is better to have purchased or rented you need to see how long it would have taken to save up the $10,000 in equity.  In truth this is the simple version, there are many more things that go into the equation such as taxes, home repair costs, insurance, etc…  But there is a company that has done much of the work for us, Zillow.  By comparing all of this information into what they refer to as their Break Even Horizon they explain how long it will take in a simple number of months to make purchasing a home a better option than renting in any given market.  For the Columbus GA area market, the amount ranges from 14 months to 23 months depending on the specific area in which you are living.  (11/19/2018, https://www.zillow.com/research/data/, Q1 2018 Dataset).

    Assume now that you are a Soldier assigned to Fort Benning for the Captains Carrier Course which lasts 22 weeks and is a Permanent Change of Station (PCS) assignment (meaning the Army moves you and your family).  Seeing that you are not guaranteed to be in Columbus as long as 1-2 years then you should look at rental options.  But, if you had a follow-on assignment as a commander at Harmony Church, your time on station now becomes 22 weeks plus 23-36 months which makes purchasing a home in the area when you first arrive an excellent option.

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