This is a guest post from Connie, she is a freelance writer, editor, and content manager. She works in the eCommerce industry and is passionate about all things digital. She is also the founder of Savvy With Saving, a personal finance blog for millennials. You can connect with Connie on Twitter @SavvyWSaving. Let me know if you would like to guest post on RFI.
The American Dream is centered around owning your own home. In fact, a house has become a status symbol of sorts. But it doesn’t always mean you’ve made it. Especially in times of economic downturn, we’ve heard countless stories of people’s homes going into foreclosure. Is being a homeowner really all that’s it cracked up to be? Yes and no.
Buying a home can be a very profitable investment. And it also symbolizes a long term future for you and your family. But it’s not always the wisest financial decision. While throwing money away on rent can be a tough pill to swallow, it may be the smarter choice. Let’s take a look at 5 scenarios when buying is better than renting.
You need the flexibility
Buying a home is a long term commitment. So ask yourself this – how long do you see yourself living there? If it’s only for a few years, you may want to re-think whether homeownership is the best decision for you right now. Owning a home is by no means a permanent decision. But with all the added costs, such as repairs, maintenance, and closing costs, you want to make sure you’re getting the most of your money. Be sure to do the math.
You don’t have enough for a down payment
It’s hard to say what ‘enough’ is for a down payment. It can be dependent on your mortgage rate and your financial status. But if you’re planning on putting down less than 20%, you should carefully rethink it. While buying may seem like a financially smart move, you’re going to be paying a considerable amount of interest if you’re not putting a lot down, especially in the first few years.
You live in a tough housing market
Buying property can be cheaper than renting and also a great investment but it boils down to location, location, location. For instance, the cost of real estate in New York City is considerably higher than the national average. While property values historically appreciate in certain areas, it can take a considerable amount of time for you to break even on your investment. That isn’t necessarily time you have, especially if you need to move within 5 years. And on the flip side, the market could tank.
You can’t afford the ‘hidden costs’
A mortgage isn’t the only expense when it comes to home ownership. There are lots of ‘hidden costs’ that many prospective buyers forget to think about. For starters, think about general maintenance and upkeep of your home. You’ll be responsible for all repairs. Also, if you want to sell your home in the future, you’ll encounter closing costs, which can be as much as 4% of the total selling price. Factor in other miscellaneous costs like utilities and insurance and home ownership starts looking quite expensive.
You want to have less worries
While owning a home yourself can feel very rewarding, it can also be very stressful. Aside from the day-to-day costs running of your home, you have a mortgage to think about. And in times of financial hardship, a mortgage payment can be a dark cloud looming over your head. Think carefully about the financial implications of purchasing property and whether or not you can truly afford it now and in the long run.
Making the decision to rent or buy isn’t as cut and dry as you may think. While buying may seem like the obvious choice from an investment perspective, it doesn’t always save you money. Especially if you crave flexibility, renting may be the wiser choice in the short-term. Deciding whether to buy or rent is a personal decision so do all your research and calculations.
Do you buy or rent?