Why renting is often a better option for some people
It is often asked by people who are trying to make a decision about a new home, “Should I rent, or should I buy?”
Having heard the common answer given by friends and financial experts, that buying is always preferable if a loan is available, renters are tempted to rush into a buying decision, even when their gut instinct says it is not yet time.
Renters should take heart. Renting is sometimes the best option, even if a loan is obtainable.
Here are some important reasons why people should be cautious about buying a home:
- Buyers should have enough money to make a down payment of 10% or more. If the housing crisis of 2007 has taught anything to lenders and home owners, it is that the willingness of a lender to loan money does not mean the buyer is financially stable enough to afford the mortgage payments. The better decision for someone seeking a new home, if he does not have the down payment to achieve equity in the home, is to wait until he does have it. Renting is his best option.
- Home seekers should evaluate the risk of job loss or relocation before buying a home. If his employer is unstable, or the home seeker’s position with the employer is not yet secure, it is best to wait until job security is more settled. If a buyer cannot be relatively sure of living in the same location for at least five years, renting a home is probably the best option.
- Other household debt should be erased or under tight control before someone buys a home. To spend every last penny, and to run up credit card debt to the established limits, just to get into a new home is a formula for financial meltdown should anything go wrong. Renting is a safeguard against expensive repairs and maintenance. If one does not have the money, or the time, to devote to improving or maintaining a home, renting is the best option.
The old advice that buying is always best for anyone who can get a loan is simply not realistic for many home seekers. What is more important than owning a home is establishing the financial stability that will make home ownership a better option later in one’s life.