Generation Y may be known as the generation who lives with their parents well into their 30s (hey, who doesn’t love a home-cooked meal?), but there comes a time in every millennial’s life when they need to commit to more than just an HBO subscription. When this time comes, and you’re finally ready to move out of your childhood bedroom, knowing whether you should put money into a monthly mortgage payment—or into a rent check—can be as scary as scenes from “Game of Thrones.”
Here are the pros and cons of renting versus buying a home to help you make the decision that’s right for you—without feeling like you’re going into battle.
- Consider duration. If you want the flexibility to move, or you’re not committed to staying in your current area for the long term, then being able to sign a month-to-month or yearly lease may be the best option for you. But if you know that you’ll be living in the same area for at least three to five years, then buying may be right for you. Committing to this timeline will help ensure that you recoup the initial costs of purchasing a house.
- Research the market(s). Knowing how the economy is doing should certainly play a role in your decision-making, but knowing how real estate differs throughout towns/cities that you’re considering is even more important. For example, recent data shows that in New York, it’s 11 percent cheaper for millennials to buy than rent. But if you’re looking to get away from New York winters and go somewhere warmer, like Honolulu, it’s 5 percent more expensive to buy—making renting a better option.
- Crunch the numbers. Millennials love information, and they like it fast. When making this big decision, contact a local financial institution such as Suffolk Federal and learn about the different options. For instance, could you qualify for a mortgage? If so, should you consider one with a fixed or adjustable rate? From there, make a list of the properties you are considering, research interest rates, and use a online calculator to see what you can really afford. Then compare these numbers to potential rental prices.
- Your lifestyle matters. Have you just moved to a new city and are unsure about which neighborhood may be best for you? Or are recently married and unsure of when your family could grow? Contemplating going back to school or simply not in a job that comfortably pays for your lifestyle? Then renting may be best choice for you. However, if you know you’re ready to commit to buying a house, make sure:
- You’re not in debt from school loans, car loans, etc.
- You have three- to six months of income in your savings account
- You have enough money for a 10- to 20 percent down payment
- Your mortgage payment is no more than 25 percent of you monthly income