Buying a house is an essential step in anyone’s life. For some, it can be the first place they call home. For others, it’s an investment for the future. The main question that needs to be answered when buying a house and looking at homes for sale, is “should I rent or buy?” While both options seem equal on paper, multiple factors are overlooked during this decision-making process.
Let’s start with renting
While you do not have to deal with fixed expenses, such as mortgage payments and property taxes, all of your money goes towards paying monthly rent. Suppose in any given month you struggle to pay your rent due to emergencies or other financial responsibilities. In that case, there is no option but to borrow from friends and family, take out cash advances with your credit card, or even consider bankruptcy.
When you buy a house
All of the money that used to go towards rent now goes towards paying off the mortgage on your home. This is an investment in itself and can be paid off fast if the homeowner has a high income and low expenses (which happens very rarely). So while one would think that buying a house means investing in something stable and reliable, it’s important to remember that there is risk involved with this type of transaction. You could end up sinking vast amounts of money into a venture that never sees returns.
Buying a house can vary greatly depending on location and – a cramped condo in the city versus a large estate in the countryside. This means that your average middle-class family will always struggle to afford homes, while wealthy people can buy any house they want.
When things go wrong
One last thing worth noting is that homeownership is not guaranteed if you default on payments (which happens quite often). If you miss two mortgage payments in a row, the bank will send out a foreclosure notice, and if no agreement has been made after 90 days, they may take back your house and sell it off at an auction. The trouble with this scenario is that banks usually offer low bids for homes, and so once again, only rich people benefit from these deals.
It’s clear by now that buying a house is a risky business, and it makes more sense to rent. Your money will not be tied up in this venture, you’ll have complete freedom from any fixed expenses, and if worst comes to worst, you can always get a roommate instead of suffering through foreclosure. Next time someone asks, “should I buy or should I rent?” tell them to grab a pen and paper and write down the following:
“Renting or buying isn’t throwing away money—it’s saving for tomorrow.”
What are your needs?
At the end of the day, neither renting or buying is a better option because both allow you to plan for your future. Buying a house is more of an emotional decision than anything else. If you don’t have the money to invest in real estate, then it’s best not to do any investing at all.