Owning a home is a quintessential part of the American Dream. It’s what you do once you secure a stable career, get married, and settle down.
That might have been something that felt written in stone in the past. In our culture, homeownership became one of the boxes you felt obligated to check on the “should do” list.
You should go to college and earn your degree to get a better job. You should get married to the right person before settling down and having kids. And you should buy a home as soon as you can afford to quit renting.
The thing is, your life is unique. So are your goals, needs, challenges, and opportunities. What society says you should do is not always the best option for you (or your personal financial situation).
Today, more and more people are realizing that what society says they should do does not necessarily align with the life they want to live. The question is no longer about when you should buy.
It’s whether you need to buy a house at all.
“RENT OR BUY” IS THE FIRST QUESTION TO ASK — BUT NOT THE LAST
You may have grown up hearing that “it’s always better to buy than rent,” or, even better, “you’re throwing your money away if you rent.”
Neither of these statements is true in all cases. That’s where the question can become a debate that you need to have with yourself if you’re considering renting or buying.
There’s no one right answer to the question, “should you rent or buy?” It all depends on a number of factors — as well as your personal preferences and what your financial situation looks like.
So if you find yourself asking if you should rent or buy a home, here are the other questions to consider before you can come up with the right answer for you.
IN FINANCIAL TERMS, WHICH OPTION IS OBJECTIVELY BETTER?
You can start by looking at the numbers and facts to see, from a completely objective standpoint, if renting or buying makes more sense for you.
The New York Times has an excellent calculator that you can use to determine which is best for you. It will provide you an answer based on your location, which is important. The best financial option largely depends on the market you live in.
Check out the calculator here and plug in your own numbers to see if renting or buying provides you with the better financial deal.
This will give you a baseline on which makes the most sense, financially speaking. But you don’t necessarily need to stick with what the numbers say.
(Of course, if the result is it’s much more financially sensible to rent, you may want to stick with that for a little longer and take all the money you’re saving by doing so and invest it to grow your wealth.)
After all, buying a home is rarely ever a logical decision. It’s an emotional one. Which is why what you want does matter in this decision.
WHAT DO YOU ACTUALLY WANT?
You likely have a preference for renting or buying. What do you truly want for your life?
If you prefer the ease of renting, want the ability to move when you want to, or need to outsource a large part of the responsibility of maintaining a property to your landlord, renting might be the best option for you.
In fact, it could be the financially responsible choice to make if you need to prioritize other saving and investing goals (like financial independence) or if your career is such that you either A. travel often and don’t spend much time at home anyway or B. might leave you in a position where you need to move to a different city or even state within the next 5 years.
There is nothing wrong with renting, especially if you prefer it and don’t feel ready to buy now. The worst thing you can do is feel pressured into a huge financial decision based on what you think you “should” do.
DETERMINE IF RENTING OR BUYING IS BETTER FOR YOU
It’s better to rent for now if:
- It’s cheaper than buying or your budget can’t handle a monthly mortgage payment
- You’re not prepared to commit to staying in the same town, city, or state for at least the next 5 years
- Your cash flow can’t handle the regular maintenance and repairs homes require
- There are no homes on the market in your price range
On the other hand, if you want a place of your own, are willing to put in the work required, and feel you can handle the responsibility — both financial and otherwise — that comes with homeownership, it might be time to start saving for a down payment.
If you’re set on owning, it could make sense if:
- The cost of owning a home would not jeopardize other financial priorities, like retirement savings
- You don’t have to empty out your entire savings account to afford the down payment
- Renting is genuinely more costly than getting a mortgage in your area
- Your income is stable and you expect to stay in the same location for at least the next 5 years
- You’re eager to own and willing to accept the responsibility inherent in maintaining a property
Again, buying a house (or choosing not to) can be a highly emotional decision. That makes it even more important to talk through this issue with an objective third-party who isn’t emotionally invested in the outcome.
A fee-only financial planner working as your fiduciary can help you lay out the options and evaluate them from every angle to determine the best path forward for you and your family. A planner can help you look at what you truly want and then map out action steps that will take you there.
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