People are starting to buy houses at a younger age than ever before. Many young buyers are under the mistaken idea that just because they can afford a house, they should buy one, because they won’t be wasting money on rent. Just because you can buy a house, doesn’t always mean that you should, necessarily. It’s tempting when you write a check for rent every month, as it’s like blowing money to the wind. However, buying a house before it is really time, is going to cost you a lot more than if you had stayed put in your rental. Below are many truths about buying a house, so that you can understand and decide whether you should continue renting a home, or if you should buy one.
Your feet are planted
Keep in mind, that when you rent a house or apartment, you’re only committing to it for one year max. Some leases must be signed for more than a year, but for the most part, you’re tied down for only one year or less. This gives you peace of mind that you can move whenever you want. To a different area, to a completely different city, or state. When you buy, you’ve got to stay in it for 5 years in order to get back what you spent on it. And, if the market somehow drops after those 5 years, you’ll have to stay in it even longer while you wait for the market to go up again. See: Should I Buy a House in My 20’s?.
Say bye to your friends
Realize that you’ll be spending much less time with your friends, and more time maintaining your home. Girls going to the beach for the weekend? You might be stuck at home meeting with the plumber so that he can fix your bathroom pipes. You are the landlord. There’s nobody to call anymore if something goes wrong with the property. You’ll have to remember on your own to change the heating filter or get your regular pest inspections.
There are more expenses besides the mortgage
When deciding whether you should buy your house, you can’t only compare the cost of the mortgage to the cost of the monthly rent. You have to look at more than just the mortgage payments. Buying a house is going to include having to pay insurance, property taxes, and maintenance and repair costs. These can drive your costs up to an exponentially high figure.
There are benefits, however to owning. For example, nobody can stop you from tearing out a wall, changing the bathroom tile, or getting a pet. And of course, any improvements you make can increase the value of your property. You’re not motivated to make those improvements in a rental, where they’ll only benefit the landlord. Read: Getting a Mortgage in Your 20s.
Over time, the value of homes tends to increase (though it sometimes takes a long time, with some alarming downturns in between). When you sell, any return on your investment is yours to keep. As a renter, it belongs to the landlord.
One of the biggest benefits of buying is that unlike renting, where you’ll be writing a check every month forever, you can eventually pay off your mortgage entirely. Or, you’ll be able to use the equity to buy your next house, and eventually pay that one off. And if you start investing early, the date you’re done will be that much sooner. In addition to deducting mortgage interest and property taxes, which reduces your annual tax liability, in most cases you don’t get taxed on most of the money you make from selling your home. See: Buying a House in Your Twenties: Can You Afford it?