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5 Reasons Why Renting Is Better Than Buying A Home In 2016
Author: Travis McKnight
While the Canadian and U.S. housing market continues its gradual rebound, now might seem like a dandy time to buy a home. Your fellow-renter friends are likely looking at it too, and telling you something along the lines of “renting is throwing your money away.” Well, don’t listen to them. If you’re under 30-years-old, they’re wrong. That nice shiny 20 or 30 year fixed rate mortgage might look enticing, but what about all of the hidden costs associated with owning a home? Are you really ready to deal with abandoning the subtle luxuries of renting? I didn’t think so. Here are five counter points you can give your friends as to why renting is better than buying a home in 2016.
1. Lose the ball and chain, keep your freedom.
When you buy a home, you’re pretty much stuck at that location for at least three to five years, should you want to have any chance of making the investment worthwhile. If you want to go spend the summer in London or pursue that not-so-likely acting dream and move to Los Angeles, it’s not going to happen unless you have mounds of spare cash hidden a storage unit to pay the mortgage, property tax, home owners association fee, yard upkeep costs, and much more. However, if you’re still smartly renting, you can up and abandon the place to chase those aspirations once your lease is up, or even before then if you can find a sublet renter.
2. Think that fixed rate mortgage means your monthly living costs will be cheaper? Think again.
So you’ve been given a mortgage offer that’s actually cheaper than what you’re currently paying in rent. Congratulations, that’s good news and likely means your credit and finances are in great order, which will help you out immensely once you decide to rent again. Sadly, the mortgage payment is only one aspect of your monthly living expenses when owning a home. Should anything break, and trust me something will, there is no longer a maintenance crew to call on. You have to fork out the cost of repairs yourself. After that’s taken care of, you still have to deal with the pesky property tax, principal interest, home insurance, and possibly HOA fees, all of which can increase.
3. Keep calm, and lose the extra stress.
Most of the focus surrounding buying a home versus renting is on financial gains and losses, as it realistically should be since it’s the largest financial choice many people will make during their life. But stress also plays a huge part in home buying, and you should be ready for it. “The Holmes and Rahe Stress Scale, a landmark stress study conducted in 1970, ranks many events that go along with buying a home in the top 43 most stressful circumstances in life. Four events are specifically home-related: change in financial state (No. 16), large mortgage or loan (No. 20), change in living conditions (No. 28) and change in residence (No. 32),” according to US News. Although everybody handles stress differently, being overloaded with it can lead to missed or delayed mortgage payments, which can consequently tank your credit and make you potentially lose the home.
4. Yard work, broken appliances, who has time for those?
Since you’re looking at buying a home, I imagine you likely have a steady, well-paying job where you work hard each day for your paycheck. After getting off work do you really think it sounds like fun to go home and rake piles upon piles of leaves, shovel snow off the driveway and sidewalks, cut the grass and trim the hedges? Plus, what happens when you find a necessary upgrade, like a new roof or water heater? You don’t want to have to deal with removing large appliances.
“Homeowners not only need the money to make repairs, but they must make time to maintain their property, says Nancy Wert, a realty agent with Re/Max Realty Centre in Olney, Md. Even a relatively small and newer home requires at least some maintenance; an older home may require a bigger budget for home repairs,” the Boston Globe reports.
Luckily for you, when renting a place the landlord must foot those thousands of dollars in bills, not you.
5. Enjoying the mortgage tax break? What about all those ghost taxes you didn’t know about?
Your mortgage rate is likely flat and gives you a very nice tax break, so you’ll be able to budget around those stable numbers fairly easily. However, what about the ever-fluctuating real estate tax? Or the extra money you’ll have to spend up front on other purchases since the mortgage will likely drag down your credit availability. Oh, and lastly, did you actually calculate what the interest rate of that loan is going to cost you? Let’s assume the current average interest percentage rate of 4.3 stays true, you’ll actually end up paying $356,307.44 for a $200,000 home, which comes out to $156,307.44 in interest alone over 30 years.Not so cheap now, is it?