Should I rent or buy a house?Mar 03, 2023
You know what I hate. I hate it when I type a direct question into Google, find some blog post posing exactly that question and then find the article doesn't really answer the question, but just tells you a bunch of things to think about.
This isn't one of those posts.
Yes, you should buy a house.
Buying a house is far better than renting for a number of reasons. Here are the main reasons it's a good idea.
You have to live somewhere
Think about it this way. You either buy a house and pay your mortgage payments OR you decide to rent a house and the landlord pays their mortgage payments.
So if you have to make monthly payments to cover the mortgage interest of someone's mortgage - do you want your payments to pay off your mortgage or the landlord's?
The long-term financial reason
The above is enough to convince most people. But here's the main reason I think it makes good financial sense to buy a house.
Most homebuyers put about 35% of their income into paying their home off over 25 years. When you get to the end and the house is paid off, that means you're used to living off 35% less income than someone on the same salary that is renting.
That means you need 35% less money to retire. That's a huge difference! When you've paid the house off and you're a home owner, you can put 35% of your income into investments that will get you to financial freedom.
Prices go up
Do you think home prices will go up or down 30 years from now? Do you think the median rent will go up or down 30 years from now?
You need a place to live for the rest of your life and that is probably many decades from now so you need to think very long term.
If the value of houses is going up and the cost of rents are going up, do you want to be a homeowner or a renter?
It's not a house, it's a home
If that isn't enough, there are personal, psychological, and emotional benefits that make home buying the best choice as opposed to paying monthly rent.
It's a place to raise your family. It's a place to create memories. It's a place to feel safe.
When to wait
Even if I've convinced you that homeownership is right for you, there might be a few reasons to wait before getting into the housing market.
Firstly, you need to find an area you can afford that you want to live in for a long time. You don't want to be buying and selling houses often due to closing costs, home maintenance and property taxes.
You need to be in a good financial situation with a reasonable credit score. Home buyers should have a deposit saved for upfront costs and be able to make their monthly payments comfortably with a margin built in case mortgage rates increase. Interest rates will change.
Buying a house and paying it off won't be easy and will take some sacrifice. But it will be worth it.