Finances and Money Management Made Simple

The choice whether to buy real estate or keep renting is complicated, as it will depend on a lot of factors in and outside of your control. Here is a look at some of the issues that go into calculating if homes for sale are a good investment for you.

For the First Years, You Pay a Lot of Interest

One thing that complicates the issue is whether you plan to own the home for a long time or not. The issue is that loans are amortized. That's a fancy way of saying that interest payments are stacked towards the first years of your mortgage. If you only plan to own the home for a little while, you'll mostly be paying interest and will not have built up a significant amount of equity in the home. But sometimes, some equity is better than none, especially if you rent out rooms in the home and use a lot of that money to cover the mortgage. And if you can find low interest home loans, you can greatly reduce the amount of time you spend paying back interest.

On the other hand, the beautiful thing about a mortgage is that it is finite. Once you have put in your hard years of payments, your obligation is over and you will own the home outright. For many people, owning their own home is a big part of becoming financially independent and being able to support their families on one income or a part-time income.

Sometimes, the Market Is Just Hot

Another time when it certainly makes sense to buy a home is when the market is predicted to grow. The times after recessions are often good times to look for foreclosures and other rock-bottom pricing options. If you are willing to hold these homes until the prices rise, you can make a big profit on your investment. That requires a bit of knowledge and skill, though, because you don't want to choose a home in an area for which the prices have more permanently declined.

When Buying Is Less Expensive

The buying and renting markets in a location are independent, even somewhat converse. The demand for rentals in low-cost areas will entice more people to buy, which will increase the amount of competition for landlords and drive prices down. The point is that it may be clearly more expensive to rent or buy in your area; check with a real estate agent to see which is true for you now.

For more information, contact local professionals like those found at First Mortgage Company, Inc.