The old adage that putting money into someone else’s pocket when renting is only part of the story. Renting can sometimes be very liberating, freeing you from the burden of what to do when there’s a flood or a major appliance breaks. But it can also be frustrating, especially when so many TV programs and my newspaper columns talk about buying property.
If the financial crisis taught us anything, especially in the US, it was that not everyone should have tried to own property. You have to make a mental leap to buy something well beyond your earnings, which is what a mortgage means. There’s a fine balance between paying too much for something you can’t afford, and making a good investment.
If you are struggling to decide what to do, start by asking yourself some basic questions:
1. Are you planning to move in less than five years? It is possible to turn a property around and resell it for a profit after only a few years, but this certainly doesn’t happen in every market. If you’re a parent buying a property for a child going to university, are there other siblings who can take it on later, or will you simply dispose of it after the degree? Would renting be better for the child than buying in that case? If you’re facing moving across the country, are you factoring moving costs into your purchase costs, or is renting a better option in the short term?
2. Is your family going to expand? It’s a nice idea for a young couple to start with a home of their own, but it’s not always viable, particularly after the costs of university degrees and weddings these days. However if you know you’ll be having children and want space, then making a home purchase your priority over say, an all-night open bar at your wedding, might be a wise choice. Are you ready, financially and psychologically, to put down the roots in one neighbourhood with a mortgage and ownership? Conversely, is your family going to shrink with children moving away? Do you want more freedom from a mortgage in your later years?
3. Why are you making this decision? Just because my columns or TV tells you to buy a house, doesn’t mean you have to. Who are you getting advice from? I’m very general in my suggestions here, but I also always tell you to speak to a real estate agent and financial advisor to find out all of your options. There’s no harm in asking for advice and the right professionals will help you decide what might be best for your situation in both the long and short terms.
Whether you rent isn’t always a choice. Finances will dictate different circumstances for everyone. It is exceptionally difficult for many people to save anything, let alone the large amounts needed for a mortgage down payment. Getting on that first rung of the proper ladder can be a struggle. I always say there are more possibilities than we give ourselves credit for, but even if you can financially buy, it might not always be the option you want to take. The pros and cons of renting vs. buying are as variable in each community as they are for each individual. Do your research and keep an open mind either way.
– image source: robtanderson.com
