“Renting is just throwing away money!”
I can’t recall the first time I heard this old chestnut, but I do remember wondering about it. I must have been in my early 20s at the time, and I couldn’t understand how spending money on having a place to live could be a complete waste. Granted, I realized that I could be doing more with my money—building equity, for instance — but for where I was at the time, owning a home was simply not an option.
It’s been several years since I went through those thought processes, and after the housing collapse of 2008, I’m seeing that many young professionals and families are a little gun shy about purchasing that first home. The question is: Are they being unnecessarily cautious – and throwing away their money on rent? Or are they making a sound financial decision by continuing to rent? Here are some reasons why renting might be the smarter option:
Your Circumstances Could Change
My sister and her husband live in Virginia and dream of owning their own place. However, my brother-in-law’s current navy billet will only last for another two years, and after that it’s likely that he will be assigned elsewhere in the country. Under these circumstances, it makes no sense for them to buy a home, just to be saddled with a mortgage for a house they can’t live in. While they could potentially rent out the home and thereby use it as an investment, that would require a great deal of coordination from out of town. For them, it simply makes sense to wait to buy until they know they’ll be staying put for a while.
You Don’t Have a Down Payment
Once upon a time, this wasn’t something that would bar you from home ownership. Thankfully, things are a little more stringent these days, which is good for homeowners, banks, and the rest of us. If you don’t have enough money saved to put 20% down on a home, then rent an inexpensive place and focus on putting money away.
Another money factor to consider is whether you have enough money or expertise to handle the upkeep of your new home. Being a homeowner means that the buck stops with you when the plumbing backs up or the roof needs to be replaced. If you are not able to handle that yourself, then continuing to rent makes better sense.
You’ve Just Moved Into a Community
If a job or a degree has taken you to a new part of the country, it could be tempting to go ahead and buy a house as soon as you get there, so you only have to move once. However, you don’t necessarily have the lay of the land as soon as you get to a new community. For instance, my husband found his first house after looking around Columbus, Ohio for over a year. He started by looking at gorgeous old homes in a run-down area of the city, and ended up in a well-established neighborhood that was perfect for him. Had he bought the first house he fell for, he would have hated the neighborhood, his commute, and the level of care the old Victorian needed. As it was, the extra time searching led him home.
Your Credit Isn’t the Healthiest
While you don’t have to have a perfect credit score in order to qualify for a home loan, having a low score will raise your interest rate and make home ownership that much more expensive. If your credit history is a little spotty, it makes sense to spend a couple of years rebuilding that credit as a renter before you jump into home ownership.
Sometimes, renting is the more prudent solutions to our living situations. Don’t jump into buying a home just because you believe it’s always the right decision.