Sometimes, the decision to buy or rent a house is easy. In college, while working your first job or when you’re ready to retire may be the best times for you to rent. Alternatively, you may have a strong desire to buy a home when you settle into a job or start a family. There’s no right or wrong answer on whether to buy or rent, but I encourage you to discover the whole truth about renting and buying before you decide which path is right for you.
True or False: Paying Rent is a Waste of Money
Many people prefer to buy a home rather than rent because their monthly mortgage payments build home equity for them instead of making a landlord rich. Yet, renting might be a great opportunity to secure your financial future. For starters, renting only requires you to come up with a security deposit and the first month’s rent. You don’t need to pay for repairs, and your landlord may even pay some of your utilities. When you buy a home, you need a down payment, closing costs, and other fees. Then, you must pay for repairs, upkeep, and all utilities.
Over the course of your lifetime, renting can be a financially sound decision, since it can cost less than buying a house. Rent an affordable apartment or house, and use the extra cash in your budget to repay debt, start or grow your retirement account and stockpile cash for the future. With this strategy, renting can be a wise investment in your future even though it doesn’t build equity.
True or False: Home Ownership is a Sign of Success
Subscribers to the “American Dream” insist on home ownership as a sign of success; however, owning a home can cause severe financial hardship if you buy more house than you can afford. FHA recommends that home owners take on a maximum debt to income ratio of 31 percent. That figure doesn’t include maintenance and upkeep costs, though.
Before signing up for a mortgage that stretches your monthly income, carefully weigh your options. You want wiggle room in your budget to handle emergencies, travel or enjoy life. That may mean you buy a more affordable home, wait until you have a bigger down payment saved or rent. In your search for success, don’t automatically resist renting, especially if it allows you to enjoy life and financial success.
True or False: If I Buy, I can Never Move
You are more attached to a geographic area when you buy a home. Upgrading to a different home, relocating for work, or downsizing if you lose your job, may be challenging because you have to sell your home first. Alternatively, renters can simply put in their notice and prepare to move, sometimes within a month or two, depending on the terms of the lease, without worrying about prepping, showing, and selling their property.
Home ownership doesn’t have to be a ball and chain that creates a lifelong attachment to one house. Buying and selling real estate can be an adventure, if you look at your home as an investment. Plus, data from the National Association of Realtors shows that average homes stayed on the market just 54 days in October 2013. While home ownership is less transient than renting, you can successfully sell your home if you want or have to.
Renting or buying is a personal decision I can’t make for you; however, now that you know the whole truth about both choices, you can make an informed decision.
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