For years you have been trained to think that home ownership is one of the best final decisions a person can make. You are trained to think you are a responsible adult when you own a home. The “experts” always said that buying a home is the best investment you can make. Realistically, that isn’t always the case, as there are drawbacks to owning a home. Sometimes you are a responsible adult when you choose NOT to own a home. There could be a variety of reasons to rent, not the least of which could be to save money and generate income to invest.
The decision whether you should own a home or rent should be weighed carefully. You need to consider your short-term, as well as the long-term needs .
Consider the following:
- Would you save money renting? In some markets, owning a home is cheaper than renting, but not often. Use a home loan calculator to estimate how much your monthly payments will be. Many people stop here, but there are many other costs you must factor in. You will also need to pay property tax, home insurance, and home repairs, not to mention having a sizeable down payment available. When you factor in all of the expenses, you may see that renting will save you quite a bit of money every month.
- What are your long-term financial goals? While many homes appreciate, that is not always a given. If you plan to make other investments, you may want to use the money you save from renting to buy investment property, for instance. Then, you will have a monthly mortgage, but the renters’ rent checks should cover the majority, if not all, of the mortgage, leaving you with very little out-of-pocket expenses and an investment that grows the longer you have it.
- Would you stay in a house for five years or more? Many experts recommend you do not buy a home if you will not stay there for five years or more. By the time you pay realtors’ fees and closing costs as well as the home loan interest you pay at the front of the mortgage, getting ahead financially when owning a home for such a limited time is difficult. If there is a downturn in the property market from the time you buy to the time you sell, the problems are compounded.
- How secure is your job? Often couples take out a mortgage with high monthly payments and convince themselves they will be able to afford it, and they can, until one partner is laid off or quits. Whether you are single or a couple, consider the security of your job before buying a home. If you do lose your job and you are a renter, it is much easier to pack up and move where ever the job search takes you.
- How often do you travel? If you travel frequently, renting may be the better bet as you do not need to worry about home upkeep when you are gone such as watering the flowers and mowing the lawn. The same is true if you live in another location for part of the year. In this case, renting is just easier.
People will often argue if you are renting, you are just throwing away your money for nothing tangible in return. However, keep in mind that if you are a renter, you save yourself many expenses including paying property taxes and paying for repairs and home maintenance. You also free up your money for other purposes such as investing in real estate properties yourself. Finally, you are free to move with little advanced notice which can be a benefit in the case of job loss or lifestyle changes such as marriage or the birth of a child.
Don’t believe those who tell you home ownership is the only way to go. There is a definite case for renting. You just need to decide what is best for you and be willing to reevaluate your decision every few years. In time, you may find that owning a home makes the most financial sense. Until then, renting can be a great way to keep your options open without committing a large portion of your money or time. Just remember, you need to do what is right for you, not what anyone else says you “should be” doing.
What was the driving force behind your decision on housing? What would make you change your mind about your current living arrangements?
This article was featured as an Editor’s Pick in Totally Money Blog Carnival