Renting vs Buying

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:

 

  1. 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.
  2. 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.
  3. 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.

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