We’ve all heard it before. The adage that you must buy a house if you’re serious about your money. Some even argue that if you continue to rent you’re foolishly throwing your money away.
All you need to do is look at the fact that 17 million people planned on buying a house in 2014. That reflected an increase of nearly 1 million from the previous year. As with anything finance related, you need to make a decision that serves your best interests. If you’re on the fence about buying a house, take a look at these five reasons why you should continue to rent.
You’re Carrying too Much Debt
One of the key factors lenders look at is your debt level. Buying a house is expensive, and they want to make sure you can handle the mortgage. Most lenders want your debt level to be no more than 28 percent of your gross income and 36 percent when your mortgage is included.
So, if you’re carrying excess student loan or consumer debt, you’re likely going to be a bad mortgage candidate. This will result in a potentially higher interest rate and thus increase your cost. Focus instead on knocking down your debt and then turn your attention to a house.
You Kill Your Flexibility
Flexibility is vital when you’re just starting out in your career. You want to be able to take advantage of potential new jobs that require moving. Guess what happens when you have a mortgage? You lose flexibility. Instead of being able to leave right away you must focus energy on selling the house.
Breaking a lease can be a hassle, but is usually much less hassle than selling a house. You don’t want to give up flexibility for something that may not be in your best interest.
You Have Little to Put Down
Budgeting for buying a house requires careful financial planning. You can get a house for little down though that is not going to be in your best interests. Experts recommend putting down at least 20 percent of the purchase price of a house.
That can be a significant amount of money, but it ensures more of your money is working for you and avoids the added cost of Private Mortgage Insurance. If you have little to put down, consider taking the time to build up your down payment instead.
You’re Viewing it as an Investment
If you’re viewing buying a house as an investment, then you need to change your thinking. Unless you specifically invest in real estate, you need to look elsewhere for potential investments.
What many overlook is that buying a house usually brings on added short-term costs. If you sell the house quickly, those costs add up to additional losses.
It Brings Added Responsibility
There is something romantic about buying a house. You are arguably creating something that will be your very own. What gets overlooked is the reality that buying a house comes with added responsibilities – financial and otherwise.
Not only will the added financial and maintenance responsibility bring added stress when you’re just starting out, it can also hold you back from focusing on other things like paying off student loans, growing your wealth and focusing on your career. Responsibility can be great, but not when it brings unnecessary stress.
Buying a house is a rite of passage for many. There is nothing wrong with that. Just make sure it makes sense for you before signing on the dotted line.