For years, there has always been a debate on whether rental housing or buying your own home is better. Numerous studies have already conducted studies regarding this matter and the results are varying. Preferences also differ in terms of age group, race, economic situation, and the current time frame. Some economists and real estate experts claimed that this debate is useless because there is, in fact, no black-and-white answer.
5 Things that Tell You It’s Better To Rent
Since the implications of choosing between renting and buying still depend on your current situation, here are some things that may help you determine which makes more sense for you.
- You cannot afford a 20% down payment
If your current budget is not able to cover 20% of your dream house’s price, then it may not be meant for you. Low down payments mean higher interest rates, so paying less than 20% might cost you more in the long run.
- You have a bad credit report and high debt ratio
Should your current budget be not enough to cover the downpayment, you may have to file loans to acquire your dream house. However, a bad credit report might stop you from getting a good interest rate and might lead you to loan sharks. Succumbing to high loan interest rates and predatory lenders might not only stop you from having your own home but may also suck everything you have.
- Your job is unstable or your job location is uncertain
Yes, you can afford, let’s say, $3000 worth of monthly mortgage with your current job. But is there any risk of being laid off or fired? If so, how fast could you find another job? With you unemployed, will you still be able to cover that mortgage? If you are not sure of your current job, then rental housing might be the good choice for now.
Or maybe you have a stable job but you may be transferred to another area in the next three to five years. This isn’t a good sign either. A long-term investment like your own house may take about five years or more to earn some profits; otherwise, you’ll lose a lot of money in selling it. So if you’re not sure about staying, then you may have to consider rental housing.
- You are not ready (in all aspects) for the maintenance costs
Maintenance costs do not only refer to the financial cost of home upkeep. It also includes all the efforts and time you need to make sure everything is well in your place. So if your job requires a big percentage of your time and you barely find time to sweep the floor, having your own place might not be a good idea at present. Furthermore, maintaining your home may cost around 5 to 10% of its cost annually; so if you don’t have that amount secured yet, rental housing might be your best option.
- You are already in a good financial situation in rental housing
Try to compute your monthly renting cost and compare it to the mortgage you may have to pay if you buy a house. If rental housing costs less, then you don’t have to think twice. You are in a much better place. You can actually invest your excess money somewhere else, where there are no maintenance costs to think about and where it is easier to earn.
If you are in five situations out of the five cited above and you really want to have your own home, you may have to think twice. Remember that owning a house involves numerous costs (i.e., upfront costs, closing costs, recurring expenses) and you have to consider your financial preparedness in making this decision. Just keep in mind that you won’t be wherever you are now forever. It may change and who knows, one day, you’re already standing in front of your own home, without any worries.