Editor’s note: this is a guest post written by Marc Andre, for www.vitaldollar.com
Homeownership has been a part of the American Dream for decades. Many of us grew up being told that Buying a home is better than Renting, and becoming a homeowner was viewed as a right of passage into becoming a successful adult.
But a lot has changed over the decades. Most people no longer work for the same company their entire career. A lot of people prefer to have more flexibility. And housing markets in some areas have become incredibly expensive.
So which makes more sense, buying or renting? The truth is, it really depends on your own situation. In this article we’ll look at 7 situations that make renting the more ideal choice.
1. You Might Move in the Next Five Years
If you’re considering buying a home the first thing you should think about is how long you plan to be there. Unless you plan to be there for 5 years or more, renting probably makes more sense.
There are a lot of costs associated with buying and selling homes, and in order to offset those costs you’ll need to stay in the home for a while. Many experts believe that 5 years is generally the tipping point.
If you plan to move out of the area in a few years, or it’s likely that you’ll outgrow the house within a few years, consider waiting to purchase and continue to rent in the meantime.
2. You Need Flexibility for Your Career
One of the most likely reasons you would need to move within the next few years would be a job change. This could be due to taking a job with a different company in a new city, or simply transferring to another location within the same company.
Renting allows you to have more flexibility and makes it possible to move without major obstacles or financial loss. If that flexibility is important to you, renting may be the better choice.
3. You’re New to the Area
When you move to a new area you’re not likely to know very much about the different neighborhoods and communities within that city or town. If you buy a home you’re making a long-term decision, and if you’re not familiar with the area you might pick the wrong neighborhood.
Renting for a while allows you to take the time to decide which neighborhoods would be most appealing to you if you were to buy a home. After renting for a year or two you’ll know the places that you like to go and what you want to be near. With that in mind, you can narrow your search and buy a home in a neighborhood that will be perfect for you.
4. You Don’t Want the Hassle of Being a Homeowner
Owning a home is a lot of responsibility. When you’re renting you don’t have as much to worry about, and you don’t need to spend time on things like landscaping and home maintenance.
As a homeowner you’ll need to deal with things like mowing the lawn, raking leaves, shoveling snow, plus all kinds of home repairs and upkeep. As homeowner there is no landlord or superintendent that you can call to take care of these issues for you.
All of that home and yard maintenance will require either time or money (or both) from you. If this is something that you don’t want to deal with, or simply don’t have time for, you may be better off renting.
There are some options for owning a home without all of the headaches, like condos. But that means you’ll be responsible for homeowners association (HOA) fees and other costs that could add up.
5. You Have Credit Issues
Buying a home means that you’ll need to get qualified and approved for a mortgage. If you have credit issues, like a low credit score or just a lack of credit history, you may have trouble getting approved for the loan.
If this is the case you can continue to rent while you work on establishing credit and improving your credit score. Once you have improved your credit situation you will be able to get the loan you need, and you may even get a lower interest rate as well.
6. You Don’t Have the Money for a Down Payment
Although you may be able to qualify for a mortgage with little-to-no money for a down Payment, it’s generally not advised. If you put less than 20% down you will pay mortgage insurance on top of your mortgage payment, and that can add a significant amount each month. The worst part about mortgage insurance is that it does nothing for you. It protects the bank in case you default on the loan.
If you’re in a high cost of living area like New York City or San Francisco, saving up 20% for a down payment may be a huge obstacle that is not realistic. In other areas where home prices are not so high, waiting another year or two to buy may give you the time you need to create a budget and save up for that down payment.
And of course, having more for a down payment will reduce the monthly payment of your mortgage, so it can be worth waiting for.
7. You Can’t Afford to Buy in the Location That You Want
Home prices can vary wildly from one town or neighborhood to the next. If you decide to buy a home but you can’t afford to live in the area that you want, you’re likely to wind up making some sacrifices, like a longer commute.
If this is the case, you’ll need to decide if you would rather rent in your ideal location or own a home outside of that area. It really comes down to your lifestyle and your personal preferences.
Although owning a home is often considered to be the best financial move, there are actually a lot of situations where you would be better off renting. If you’re deciding between buying and renting be sure that you are considering the specific details of your own life and preferences to see which option really is the best for you.
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