In the personal finance world, it seems like people are always talking about two things – how to buy a house and retirement. You read a lot of tips about how to save enough for a down payment, how to build an emergency fund for repairs, and how to continually improve the value of your house.
But what if you don’t want to own a home?
The Pros of Home Ownership
As with most big decisions, there are definitely pros and cons to home ownership. But let’s start with the pros.
The big one is that you own a tangible asset. Yes, just like with rent, you are paying money every month (assuming you have a mortgage), but at the end of the day, you own something that you can sell, that you can leverage against debts (though I don’t recommend that in general), and that one day, you will have paid off and own outright.
When you own your house, you’re in charge of everything. While that definitely has some downsides, it means that if you want to paint, you can paint. If you want to replace the carpet you hate, you can. If something breaks, you can call and have it fixed on your schedule.
Assuming you have a fixed rate mortgage, your monthly payments aren’t going to change over the life of your loan. Even when the costs of everything around you are increasing due to inflation, your mortgage payment will say the same. And of course, if interest rates drop, you can always refinance and lock in a lower rate.
One big key to home ownership is that many people try to have their homes paid off before they retire, thus reducing their expenses in retirement. Of course, when retirement is decades away, it’s tough to say whether or not the home you buy now will be your forever home.
The Cons of Home Ownership
I love being a homeowner, but there are definitely cons to it.
The big one is that you are in charge of everything. Your dishwasher breaks? You have to call someone to fix it, be there while it is being fixed, and then pay for the repair. With a rental, you call the landlord and it’s taken care of (of course, you and your landlord may have a different deal setup). Even worse is when something bigger breaks. Recently, I discovered a leak around the window. It turned out to be a huge problem and part of my house had to be torn down to the studs and rebuilt. Let’s just say that wasn’t an inexpensive project.
While your mortgage may stay the same, your property taxes will likely increase over the life of your mortgage, so if you escrow your property tax, your monthly payments will probably increase over that time period.
If you get a new job or want to relocate, selling a house is much more complicated than leaving a rental. So if you aren’t set on your location for a significant period of time, ownership probably isn’t for you.
What about Condos?
For a lot of people, a condo is a good split between owning a home and renting an apartment. You get the benefits of ownership without much of the maintenance. Of course, condos do have their downsides too, such as getting hit for an assessment to buy a new roof. If you’re considering a condo, make sure you do your research into the building. Talk to other owners.
So Should You Buy a Home?
Home ownership doesn’t have to be your ultimate goal, but you should run the numbers and decide what’s right for you. There is nothing wrong with renting, and especially if you’re in a bigger city, renting gives you the opportunity to try out different neighborhoods, find out where you really want to live.
I do always recommend not renting at the top of your price range – spend a little less and sock away the difference. Maybe you’re saving for a down payment, maybe you’re just saving to travel, but take advantage of the situation and save some money for something in the future.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.