The Lincoln Lending Blog

A friend once asked me, “Should I rent or should I buy?” I told him that it all depends on your individual situation, and there are several factors to consider. My answer probably seemed somewhat cryptic to my friend, and I probably even sounded like a non-committal politician in a way.

As a mortgage lender here in Oklahoma, I tend to lean towards buying, and this is not just because people buying houses has a direct effect on my livelihood. I have always felt like paying rent is like throwing money out the window; because for one, you need someone to allow you to live in a space, and when it is time to move on you have nothing of any long-term value to show for your time there. Buying a home, on the other hand, allows you to build equity. And when it is time to move on from an owned home, there is a good likelihood you may have a sizable nest egg built up.

Am I saying that everyone should buy a home? Of course not. We must all individually weigh the “rent or buy” decision and make the best possible choice depending on our own situation.

So, what factors do you need to consider? As I mentioned to my friend when he asked, the answer depends on multiple factors, including your finances, your long-term plans, and your personal goals.

How Much Can I Afford?

The first step here is to look at your budget and see how much you are paying now. From that point, try to decide if you can afford to pay more, if you need to keep housing expenses the same, or maybe you are struggling financially and need to reduce your monthly payments.

If you are willing & able to get roommates to share costs, then renting is a cheaper and probably better option. If you are a more private person and don’t want to defray your costs by sharing your space with friends, then buying can often be cheaper than renting, as monthly mortgage payments tend to be lower than the rent charged for a similar property (more on this later).

How Long Do I Plan to Stay Put?

If you are unsure about where you want to live long-term, then renting is probably a good option for you. Perhaps you are looking for a career that will potentially require you to relocate, or you have not necessarily decided if you want to stay where you are or move to another community. If you are more settled and don’t plan on moving within the next couple of years, then definitely consider buying.

What Are My Personal Goals for the Next Few Years?

This is where each individual just has to consider what is important to them at this stage of life. Do you want to travel the world or are you ready to settle down and start a family? Do you like spending a lot of money on social events with your college friends at the moment? Or are you married with two dogs and need more space? Or maybe you need to rent because your career could require you to relocate at a moment’s notice. You get the point that every situation is different & that with careful consideration of your values, goals, and plans, you can make the right decision.

Pros and Cons of Renting

Pros

• Flexibility: sign a 6- or 12-month lease or go month to month. Short-term options make it easier to move locations at a moment’s notice.
• No Maintenance costs: You generally have the landlord on call, with expenses covered
• Roommates can offer the opportunity to defray costs
• All bills paid: utilities (to a certain extent) can often be included in your rent payment, saving you money.

Cons

• Deposits: Security deposits and pet deposits can be expensive, and most of the time are non-refundable
• Landlord: renter is at the mercy of the landlord (urgency to respond, schedule, procrastination etc.) when it comes to home maintenance issues.
• Cosmetic customization: Typically, you aren’t allowed to change paint colors or customize your living space to meet your tastes/needs

Pros and Cons of Buying

Pros

• Build equity in a home by paying down the principal, and you get the benefits of the appreciation of the value of the home.
• Often cheaper; monthly mortgage payment on a home is usually less than the amount of rent charged for a similar sized home located in the same area (think about it: the landlord has to recoup enough rent for his or herself to be able to pay the mortgage they have, plus make some profit)
• Tax Deductions; mortgage interest is tax-deductible
• Cosmetic, or even structural customization: you can “make the house your own” by changing the color scheme, landscaping, etc.

Cons

• Need money upfront: most of the time you will need money saved up for a down payment.
• Upkeep costs = mowing the lawn, & general maintenance of heat/air/appliances; owning a pool and all the maintenance that comes with that, versus the ease and convenience of using the shared community pool at an apartment complex
• Limited freedom to pack up and move whenever & wherever you want

So... Should I Rent or Should I Buy?

The easy answer is that it is smarter to rent when you are unsure of your future, and it is smarter to buy when you feel stable. Maybe you haven’t settled on a career path yet or you are unsure about the stability of your job. Maybe you just don’t know at the particular point in time if you want to stay where you are or move to another city. If this sounds like you, then you should rent.

If you know that you want to remain where you are for at least the next 2-3 years, your job situation is fairly stable, and you have a little money saved up in the bank, then you should definitely look into buying a home.

At Lincoln Lending, we can assist in making the right decision for you, and if that decision is to work towards owning your home, then we can help you through every step of the home-buying process.

While Lincoln Lending (NMLS # 398026) cannot legally give financial advice, our lending experts have years of experience in helping clients work step-by-step through the process and timeline of buying their homes. We would be happy to schedule a no-cost, no-obligation meeting to review your specific situation and discuss the options available to you depending on your situation. Please call us at (405) 799-5363 or email us at info@lincolnok.com to schedule a time to discuss your home purchase options.