Renting vs. Buying a Home in New Mexico

Renting vs. Buying a Home in New Mexico: Which is Right for You?

The news has been pretty doom-and-gloom regarding real estate lately. You may have heard that renting is less expensive than buying a home in most areas, but does that mean you should put off your home-buying search and rent instead? The answer is—it depends. Let's look at some key factors to consider when choosing between buying and renting in New Mexico.

Financial Considerations

For many people, the financial aspect of buying versus renting will be the biggest deciding factor. Of course, you know that you should look at what your monthly expenses will be and if you can afford them. When you buy a home, you'll be responsible for covering property taxes and homeowners’ insurance on top of your mortgage payment. Plus, it would help if you set some money aside for maintenance. Both renters and homeowners must budget for utilities like electricity, internet, water, and garbage collection each month.

In addition to the monthly expenses, you'll want to consider the upfront costs of buying and renting. In New Mexico, renters can expect to put down a deposit of one month's rent before moving into a home. That may not sound terrible, but if you plan to move every year or two, that money does add up. Buyers will need a down payment between 0-20% of the home's purchase price, depending on the type of loan they're using. Either way, you're looking at a pretty nice chunk of change.

Long-Term Financial Benefits

One of the biggest benefits of homeownership is the long-term financial benefits. If you plan to stay, put for a while and commit to keeping your home maintained, the payout when you sell your home could be huge. You will gain equity as you pay down your mortgage and as your home appreciates in value. That equity can be yours to keep tax-free once you sell the house as long as you meet the capital gains exclusion requirements. Renters don't see that benefit and are lucky to get even a portion of their deposit back. So, while you may be paying less each month to rent, you won't see any financial return - on the flip side, homeowners might pay more each month, but if they sell their home at the right time, they can get all of that money back and then some.

Flexibility vs. Stability

If you are in a place in life where you don't want to stay in one place for very long, renting is the right choice for you. Lease agreements typically range from six months to a year, so if you're focused on career advancement or just aren't sure where you want to live, renting a home may be the better option for you since you will have much more flexibility.

Owning a home makes it much more challenging to pack up and leave if you aren't happy with work, relationships, or location. However, if you are planning to start a family, have kids in school, or have a stable career, owning a home is probably the better long-term option. The stability of owning a home can make life a lot less stressful since you won't have to worry about things like your landlord selling the house or increasing rent to an amount you can't afford at the end of a lease term.

Market Conditions in New Mexico

Before buying a home, it is a good idea to look at the real estate market and future predictions. The New Mexico real estate market has shown steady growth in recent years. New homes are being built in the major cities, and home values have been increasing as the state grows. However, the growth, along with higher interest rates, has made it more difficult for first-time home buyers to get into a home of their own.

Unfortunately, the rental market is also competitive, and rent prices have also increased. Regardless of which route you take, plan for it to take a little longer than expected, and don't get your heart set on finding your dream home right away.

Overall, the decision to rent or buy depends on quite a few factors, and there is not one solution for everyone. Before jumping into either scenario, consider your finances, lifestyle, and long-term goals. If you're ready to buy a home in New Mexico, give us a call. We are experts in the real estate industry and would love to help you purchase your own home.