Are There Situations Where Renting Makes Sense?
The traditional advice that you’ll often hear as far as renting versus buying is that it’s always better to buy a house when you can. Otherwise, as you’ve probably heard, it’s like you’re throwing money away by giving it to your landlord rather than building equity in your own home.
Of course, this is true. Buying a home can be a smart long-term investment and your main asset.
With that being said, not everyone or every situation is the same. There can be specific scenarios where continuing to rent makes more sense than buying a home.
Do You Have Any Savings?
A lot of times, when you want to buy a house, you’ll set aside the down payment. That’ll be all you save for though, and then you’ll have a monthly mortgage payment to cover. This might be all you budget for.
Owning a home is probably going to mean you have to spend more than that, though.
Before you’re ready to buy a house, you should ideally have savings that can cover three to six months of all your expenses.
Can You Put 20% Down?
No, you don’t automatically have to put 20% down when you buy a house, but you should aim to have at least that much for a down payment. If you can’t put 20% down, then you need to plan on paying private mortgage insurance every month.
This, much like renting, means you’re “throwing money away.” No, you aren’t really but it’s not a great financial idea to pay for PMI.
Avoid it if you can.
PMI can end up costing around 2% of your total loan amount every year.
Did You Just Relocate?
If you just moved to a new city, give yourself some time to get adjusted before you buy a home. It’s okay to rent if you’ve just moved somewhere new. You might figure out you don’t like the new area. While you’re renting, even if you do think you’ll stay, it gives you time to feel out the different neighborhoods and learn more before you actually jump into homeownership.
Do You Have a Lot of Debt?
Unfortunately, there’s somewhat of a student loan debt crisis in the United States right now, and it’s affecting people’s ability to buy homes. Before you take on the debt of a home loan, you should have tackled your high-interest debt first. This includes not only student loan debt but also credit card debt.
You’re financially going to be better off paying those things down before you put your money toward a down payment to buy a house.
If you don’t prioritize that expensive, high-interest debt, you’re going to pay a lot more over time than you needed to.
Are You Sure About Your Career?
If you’re just starting out in your career, you frequently change jobs, or you’re thinking about changing your career, hold off on buying a house. You don’t know what your financial situation will be like, or even if you’re going to be living in the same city. You might find a job opportunity elsewhere.
Is it a Seller’s Market?
It’s a seller’s market in much of the country right now. You need to be aware of what the real estate market looks like where you plan to buy. If the home prices are too high and inventory is low, it can end up being a better financial decision for you to hang back and keep renting until things settle down. If you don’t, you might buy a home and pay too much for it, meaning you’re underwater when you want to sell it.
Yes, owning a home is an important part of overall financial stability, but contrary to popular belief, it’s not always inherently better to buy compared to continuing to rent.
Original post from: https://realtytimes.com/consumeradvice/buyersadvice/item/1042574-are-th…