Buying a home.
Thursday, January 25th, 2007
If you’re currently renting a home, the amount you pay towards rental only gives you the right to stay for a limited period; until the next rental is due. Given that it’s usually a large chunk of the monthly income, it makes sense to explore whether you could do better buying it instead.
In some areas - typically large cities like New York, where property prices are much higher but rentals relatively low, it doesn’t work out. You’d end up paying more to buy than to rent. It might still make sense from an asset building perspective - but you need to check out whether it does.
But in most places, you could find homes such that the mortgage and other monthly payments work out to around the same as your rental. If you can, jump at the option; instead of paying just to live there, the same or similar payment allows you to live there plus own the place.
A good thumbrule to start with is to look for properties with a price that’s two-and-a-half times your yearly income or less; that makes it affordable with your current income. If these are comparable to the place you’re living in, then it’s a lot easier to go ahead.
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