Saudi Press

Saudi Arabia and the world
Sunday, Jun 01, 2025

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

Saudi Press
0:00
0:00
Close
OPEC+ Agrees to Increase Oil Output for Third Consecutive Month
Turkey Detains Istanbul Officials Amid Anti-Corruption Crackdown
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
European and Arab Ministers Convene in Madrid to Address Gaza Conflict
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
Iranian Revolutionary Guard Founder Warns Against Trusting Regime in Nuclear Talks
UAE Offers Free ChatGPT Plus Subscriptions to Citizens
Lebanon Initiates Plan to Disarm Palestinian Factions
Iran and U.S. Make Limited Progress in Nuclear Talks
The Daily Debate: The Fall of the Dollar — Strategic Reset or Economic Self-Destruction?
Trump Administration's Tariff Policies and Dollar Strategy Spark Global Economic Debate
OpenAI Acquires Jony Ive’s Startup for $6.5 Billion to Build a Revolutionary “Third Core Device”
Turkey Weighs Citizens in Public as Erdoğan Launches National Slimming Campaign
Saudi-Spanish Business Forum Commences in Riyadh
Saudi Arabia and Spain Sign MoU to Boost SME Sectors
UK Suspends Trade Talks with Israel Amid Gaza Offensive
Iran and U.S. Set for Fifth Round of Nuclear Talks Amid Rising Tensions
Russia Expands Military Presence Near Finland Amid Rising Tensions
Indian Scholar Arrested in Crackdown Over Pakistan Conflict Commentary
Israel Eases Gaza Blockade Amid Internal Dispute Over Military Strategy
President Biden’s announcement of advanced prostate cancer sparked public sympathy—but behind closed doors, Democrats are in panic
A Chinese company made solar tiles that look way nicer than regular panels!
Indian jet shootdown: the all-robot legion behind China’s PL-15E missiles
The Chinese Dragon: The True Winner in the India-Pakistan Clash
Australia's Venomous Creatures Contribute to Life-Saving Antivenom Programme
The Spanish Were Right: Long Working Hours Harm Brain Function
Did Former FBI Director Call for Violence Against Trump? Instagram Post Sparks Uproar
US and UAE Partner to Develop Massive AI Data Center Complex
Apple's $95 Million Siri Settlement: Eligible Users Have Until July 2 to File Claims
US and UAE Reach Preliminary Agreement on Nvidia AI Chip Imports
President Trump and Elon Musk Welcomed by Emir of Qatar Sheikh Tamim with Cybertruck Convoy
Strong Warning Issued: Do Not Use General Chatbots for Medical, Legal, or Educational Guidance
Saudi Arabia Emerges as Global Tech Magnet with U.S. Backing and Trump’s Visit
This was President's departure from Saudi Arabia. The Crown Prince personally escorted him back to the airport.
NVIDIA and Saudi Arabia Launch Strategic Partnership to Establish AI Centers
Trump Meets Syrian President Ahmad al-Shara in Historic Encounter
Trump takes a blow torch to the neocons and interventionists while speaking to the Saudis
US and Saudi Arabia Sign Landmark Agreements Across Multiple Sectors
Why Saudi Arabia Rolled Out a Purple Carpet for Donald Trump Instead of Red
Elon Musk Joins Trump Meeting in Saudi Arabia
Trump says it would be 'stupid' not to accept gift of Qatari plane
Quantum Computing Threatens Bitcoin Security
Michael Jordan to Serve as Analyst for NBA Games
×