I've shared my story of moving to Lexington in a previous blog post, and after living here for 7 years I am fascinated by how fast it has changed. Even in a short period of time that I have called Lexington my home, I have watched how fast new buildings have been raised, both commercial and housing alike. Our community has a significant housing shortage to accommodate the growth, and developments pushing toward the county line are becoming far more common. With both home prices and rent rising, it's natural to ask what is best for you financially. Here are three factors to consider in your decision:
Equity: If you currently rent, there are clear advantages in doing so: not paying property taxes, upkeep on the property, and calling the landlord when something breaks are the most prevalent. For someone just starting out in their career or someone repairing their financial situation, renting may be the clear choice for them. However, for someone more established with a better credit history, owning a home begins the process of building equity. For most of us who choose to have a 30 year fixed mortgage, the sooner we this path the quicker we will likely pay off our home. I'm personally a believer in fully owning your home when you can afford to do so, and the sooner you start, the better your long term finances will likely look.
This handy graph from Dave Ramsey maps out the path of paying off a mortgage over time.
Affordability: If you currently live in California and New York, you can disregard this part. For much of the nation and in Kentucky
it is more affordable for the average family to buy a home over renting. We are fortunate in Lexington to have affordable homes in comparison to larger metro areas in the country. Certainly, every family's financial situation is different and I strongly suggest you review your financial situation with a tax adviser (to understand the tax implications and benefits to buying a home) along with discussing with a trusted real estate agent.
Financial Stability: Once individuals & families begin to settle down and careers take root, a
key to long term financial growth is having as much stability as possible on your controlled expenses. If someone has a fixed rate mortgage on their home for 30 years, the month-to-month mortgage payment won't change over time; only factors such as insurance and taxes may change. For someone who currently rents, you may experience rent increases every year that can add up over time, and siphon off growth in your income. As mentioned above, buying a home isn't for everyone and worth doing extensive review of your current financial situation to determine if it is right for you.
Bonus factor: Providing that it makes financial sense, buying a long term home can provide benefits in unexpected ways. For some, buying a house will mean they will bring their newborn children home; for others, it may be starting a business or social gatherings to remember. Personally, we bought our home with the intention of living it in for as long as possible, so our children can grow up remembering our home & the memories that came with it. Every family is different, but staying in a home for the long term may make sense for reasons beyond dollars and cents.
I believe in the power of financial stability, and taking control of your finances for the best future possible for you and your family. For some people, this can mean buying a home and taking time to grow in equity, leading to greater success later in life. No matter where your finances are today, you can always take steps toward growth for a better future.