- Why You Should Consider Renting Your Home Instead of Buying… For Now
Before rushing headlong into a mortgage, consider these points.
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“Common knowledge” (whatever that is) has always claimed owning a home is better than renting. After all, why should you pay rent when you could be building equity in a home?
Unfortunately, it’s not always as easy as that.
There are a bunch of reasons why you could be better off putting your home-buying plans on hold. Your reasons could be personal, professional, or purely financial. For some people, waiting before plunging into homeownership is temporary. For others, renting a home or apartment makes more sense overall.
Most first-time homeowners will tell you the same thing. If they knew how much work and expense was involved in acquiring their first home, they might still be renting. I know I felt that way.
When you own a home, you suddenly become responsible for its repairs and upkeep. Unlike your renting days, there’s no landlord to call when the plumbing fails. Is there a furnace problem? That’s your problem now. And no one is going to mow your lawn or shovel your walk unless you’ve arranged and paid for it.
Or you could be the one doing it yourself.
Before taking on a mortgage, homeowners insurance, and arranging for utilities, you need to decide if you’re ready for the rest of the responsibilities that come with owning a home.
You might decide that life is too short to have to deal with all that. Maybe you’d prefer to rent and leave the hassle to someone else.
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Do you have to travel a lot for your job? Do you find yourself having to move every few years because of work?? Have you lost out on opportunities because you couldn’t relocate easily?
If you’ve answered yes to any of the above, renting may be more to your advantage at this stage of life. Most leases last only a year or two, and breaking a lease isn’t all that difficult if the parties are on good terms.
In contrast, having to sell your home because of an unexpected move can be both expensive and exhausting. If your career relies on being flexible, renting might make more sense.
Unless you’ve got a significant amount of cash on hand, you can’t even think about buying a home without good credit. Following the real estate bubble burst in 2007 and the volatile pandemic-era economic climate, many financial institutions banks have applied stricter controls on loan application requirements. Younger potential homebuyers who are saddled with college debt may find their debt-to-income ratio makes having a good credit rating a challenge.
Therefore, it makes sense to continue renting while building a more extended, more substantial credit history that would be sufficient for obtaining a first-time homebuyer’s loan. A solid, reliable record of paying rent on time can help improve credit scores considerably.
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If you’re determined to buy rather than rent, plan ahead for how much your downpayment might be. Depending on the type of mortgage you want, the required downpayment may be more than you’re ready to for. Generally, you want to have at least 20% of the mortgage for your down payment. Anything less might require mortgage insurance, which adds to your monthly payment.
Of course, the bigger a down payment you begin with, the less you pay for later.
The twist comes when you consider that some places you may be looking to purchase a home are more expensive than others. Saving for a 20% down payment for a home in San Francisco or Manhattan will be a bigger challenge for many beginning home purchasers.
Renting gives you time to build up your savings.
Many people dream of owning a home. Many are told that’s the goal for everyone. The truth may be, however, that it might not be the best decision for everyone. Some folks would be better off taking some time to gather more resources. Some might even need to ask themselves if they want the commitment of owning a home.
Sometimes renting is the better choice. I’m not saying buying a home is a bad idea. I’m glad we own our home.
But we might have had an easier time early on had we taken an additional year or two to build up a little more.
You have options. You need to decide what’s best for you. And you need to know that you don’t have to rush into anything.
Do it when the time is right.
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- Date of publication:
- Thu, 04/08/2021 - 04:49
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