When is it Better to Rent Instead of Purchase a Home?
In the process of choosing where to live the first major question is whether you should look for a place to rent or if you should purchase your own real estate property. Most often when seeking financial advice from those who are savvy in the world of finance we assume the answer would always be to buy.
We often think of renting as a waste of money, because there is much advice out there stating that you are paying the property owner's mortgage with little credit to your benefit for making the payments.
Purchasing real estate is not always the best choice for every person. There are some situations where it is financially smarter for someone to rent for now and hold off on becoming a homeowner. Here are three life situations that financial expert Dave Ramsey says are better to rent than buy.
When Debt is Being Paid Off
If you are unaware of Dave Ramsey, his main stance on financial advice is seeking financial health, and to get to a place of financial health, Ramsey believes in living as debt free as possible. He advises that homeowners should begin their home-buying journey with no other debts.
He explains on his financial advice blog that it is better to have a landlord pay all the extra costs of homeownership like maintenance and a higher cost for insurance while you use those funds for paying off high-interest debts first.
In some cases, it may be beneficial to go ahead and buy if the payment for the debt is low and you are in a good stable financial situation. But some might say why not just take that extra money you have and pay the debt down to save much more money on the interest you would pay?
Moving for Job Relocation
If you are relocating to a brand new area for your work renting may be the best way to get into a home when you first get there. If you currently own a home there is no guarantee that you will sell your current home in a timely manner before needing a new one in the new location. It is also very difficult to know if you will be happy in a new location without really getting to know it first.
The best way to determine exactly where you want to move in a brand new city is to rent and try things out first. This helps you to get better acquainted with the area before committing to longer-term homeownership. If you do not plan to be in your new location for at least five years renting is always the better financial choice because of the cost of buying a new home. Selling a home in less than five years of buying hardly ever brings much of a profit.
Major Life Transitions that Require Time for Planning
If you are just graduating college and not sure where your career will take you, just got married and not sure how many kids you want or when you will begin a family or other things in a similar fashion where you are unsure where your life will be in the next few years, it is better to continue to rent for now.
Purchasing a home is best done when you can make a long-term commitment to the home. This is because building wealth with homeownership is done at a slow and steady pace. It is one of the most reliable investments an American can make, but it is not a get-rich-quick kind of thing.
Did you know we can help you find a location to rent a home in Boston and surrounding areas as well as help you with a Boston home purchase? For more information on Boston area rental contact us anytime.