Beautiful Virgin Islands

Sunday, Jul 12, 2026

Should you rent or buy a home? Ask yourself these 3 questions

Should you rent or buy a home? Ask yourself these 3 questions

Deciding whether to rent or buy a home can have you talking yourself into financial circles.

"Take advantage of low mortgage rates and build equity!," your "buy" brain says. "Have flexibility and keep your costs of getting in and out low!," your "rent" side says.

Ultimately, the decision comes down to your financial fitness, how long you plan to live in the home and what your cash flow looks like.

While the number of home purchases reached a 14-year high in 2020, prices also went up considerably. Meanwhile, with so many people leaving major cities, landlords have been left in the lurch, and that has translated into some attractive rental deals.

Ask yourself these three questions to find out whether renting or buying makes more sense for you.

1. Are you financially fit?


The first step is to figure out if buying is even an option.

The decision between renting or buying is less about home prices or rents and more about whether you're ready to be a homeowner. What does your savings look like after a down payment is taken out? What is your credit score?

Andrew Dressel, a financial planner with Abundo Wealth in Minneapolis, likes people to have six months of expenses saved up in an emergency fund, $10,000 in cash to cover closing costs and moving expenses, and a credit score of 720 or higher.

"The emergency savings is of high importance and the 720 credit score has more wiggle room," he said.

In addition, the overall cost of owning the home, including the mortgage and utilities, taxes, maintenance of appliances and the yard and the expense of everyday wear and tear should not exceed 40% of a person's take home pay, he said.

"They need to also make sure they are not sacrificing their retirement or other goals just to own a home right now," Dressel said.

Leo Marte, a certified financial planner with Abundant Advisors in Charlotte, North Carolina, said people should also strive to be debt-free before buying a home.

"If you are not financially ready, paying rent is essentially buying patience and insurance against homeownership costs," he said.

2. How long will you live there?


If you only plan to live somewhere for two or three years, experts recommend renting. Especially now.

"If you are in a city and need to stay there, now is a great time to continue to rent and get more for your money," said Jay Abolofia, a certified financial planner with Lyon Financial. "People are able to rent in the city for dramatically less because other people have fled and landlords have had to drop their rents."

If you're feeling overwhelmed or rushed by purchasing in some hectic markets with low inventory, he said, renting is not a bad place to land, if it's only for a year or so.

He dismissed the sense of urgency many potential buyers are feeling to lock in mortgage rates at their current record lows, saying that interest rates and home prices often have an inverse relationship.

"When interest rates are lower, that puts upward pressure on housing prices," he said. "Just because interest rates are low doesn't mean it is a good time to buy and higher interest rates doesn't mean it is a bad time to buy a home."

But, Abolofia said, it is always a good time to buy if you're planning on staying there for a while.

"The longer you're going to stay, the more it makes sense to buy," he said.

Once you've determined your estimated time in this home, cross check yourself by asking if you're being too conservative about how much house you should buy, said Leonard Steinberg, an agent at Compass in New York.

"You should be conservative enough that you can sleep at night and eat," said Steinberg. "But many people are too conservative."

He said he often sees people buy homes that are too small and, after a few years, they realize the space isn't working for them.

"Now they have the costs of selling and buying again," he said, which includes closing costs, inspections, appraisals and realtor's commissions. "Moving a lot is expensive."

3. What are your monthly payments?


There is a certain amount of money you will need to buy a home, complete the transaction and maintain it, and there is no sense in rushing into homeownership before you can comfortably cover those costs.

"If you can afford the mortgage on a monthly basis, can maintain an adequate emergency reserve and are at the right point in life, go ahead and buy," said Noah Damsky, a chartered financial analyst with Marina Wealth Advisors in Los Angeles. But, he says, do the math first.

Damsky recommends that your monthly mortgage payment should not exceed 35% of your gross income. But that is the upper end. Other models are more conservative and suggest 25%, in order to keep your debt-to-income ratio lower. A middle-ground recommendation says you shouldn't put more than 28% of your monthly gross income toward your mortgage payment.

Also consider what you can afford upfront.

While traditionally buyers are encouraged to purchase a home with a 20% down payment, Damsky said, it could be advantageous to accept a larger mortgage balance with a lower down payment since mortgage rates are currently below 3%.

"I encourage clients with less than a 20% down payment to purchase a home if they can obtain mortgage insurance at less than 0.2% per year and can maintain six months of emergency reserves after the purchase," said Damsky.

And while some potential buyers may look forward to the tax benefits of homeownership -- including deducting mortgage interest, property tax payments and other expenses from their federal income tax bill -- Damsky cautions not to go overboard.

"I try to temper their expectations by explaining that the tax benefits will often be substantially offset by a roughly 1% annual maintenance cost."

And they should be warned: The out-of-pocket costs of caring for a home could be even more, said Matt Hylland, a financial planner at Arnold and Mote Wealth Management in Cedar Rapids, Iowa. He advises homebuyers to budget 2% to 3% of the home's value to cover upkeep and maintenance.

"Making sure you find a monthly payment that you can afford is important," said Hylland. "But don't forget to add to that other expenses you will face as a homeowner."

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
The AI Invoice Shock: Layoffs Didn't Save Managers Money — They Cost Them More
Concern: Sexually Transmitted Bacterium Among Men Develops Antibiotic Resistance
Following Massive Investor Demand: SK Hynix Raises 26.5 Billion Dollars on Nasdaq
Passenger Partially Pulled Out of Ryanair Jet After Cabin Window Fails Mid-Flight
After Four Years, and Under a Heavy Veil of Secrecy: King Charles Meets His Grandchildren, Harry and Meghan's Children
Severe Heatwave Drives Dangerous Ground-Level Ozone Pollution Across Two Thirds of European Union
Westminster in Freefall as Farage's By-Election Gamble Triggers Broader Systemic Crises
Institutional Fractures and Political Volatility Reshape Britain's Domestic Landscape
Deadly Fire, Health Emergencies and Political Upheaval Shape a Volatile Global News Cycle
Flight Instructor Jumped to His Death — Student Landed the Plane: "You Know What You Need to Do"
The Physical and Electronic Barriers Disrupting Domestic Wireless Networks
France and Morocco Open World Cup Quarter-Finals as Collina Defends Refereeing
Prince Harry Suffers Major Court Defeat in Legal Battle Against Daily Mail Publisher
Bonnie Tyler, Welsh Singer Behind Total Eclipse of the Heart, Dies at 75
Tech Pulse: The Future of AI and Screen Culture
Global News Briefing: Escalating Geopolitical Tensions and Corporate Shakeups
Global News Brief: Escalating Conflicts, Public Health Crises, and World Cup Drama
Federal Financial Framework Shifts as Treasury Launches Universal Savings Program for Minors
French Court Allows Le Pen to Run for Presidency, but with an Electronic Tag: "I Will Appeal, and I Will Run"
$1.4 Trillion: The Lawsuit That Could Crush Meta
Europe's Growing Struggle with Extreme Heat and Air Conditioning
UK Daily Briefing: Legal Developments and Social Issues
Political Turmoil and Rising Costs
Anthropic Reengineers Agentic Architecture to Shift Autonomous Workplace Automation to the Cloud
Logic Flaw in Windows 11 Permission Architecture Silently Consumes Hundreds of Gigabytes of Local Storage
Apple Advances Late-Stage Operating Systems with Fourth Beta Deployments
Global Crisis Alert: Escalating Middle East Tensions and UK Political Upheaval
Deep Purple Has Released Its Best Album in Decades
Microsoft Lays Off 4,800 Employees and Xbox Suffers the Hardest Blow
Morocco and France Advance as 2026 FIFA World Cup Enters Quarterfinals.
Historic 2026 Tour de France Opens in Barcelona With Revamped Team Time Trial.
Global Mergers and Acquisitions Approach $4 Trillion Defying Geopolitical Tumult.
Negotiators Advance 20-Point Framework for Gaza Ceasefire and Demilitarization.
OECD Warns Middle East Conflict Will Depress Global Economic Growth.
Ukrainian Drones Strike Major Oil Terminal in St. Petersburg.
World Meteorological Organization Issues Urgent Alert Over Rapidly Intensifying El Niño.
United States Commemorates 250th Anniversary With Diplomatic Summits and Global Flotilla.
Iran Begins Days-Long Funeral for Supreme Leader Khamenei Amid Strait of Hormuz Standoff.
Technology giant reports surging carbon emissions driven by artificial intelligence infrastructure demands.
Artificial intelligence adoption accelerates workforce reductions across the technology and financial sectors.
Global technology and financial conglomerates collaborate to launch a new stablecoin standard.
United States regulators lift export restrictions on a major frontier artificial intelligence model.
Luxury bags take over the World Cup: style, status symbol, or just showing off?
×