A home is one of the largest and most important investments you could ever make. However, home ownership is not right for everyone. You need to be sure that your finances are in order, and you could even get away with foregoing home ownership if you have a strong stock portfolio.
Renting is sometimes the better option, and it’s important to consider the benefits of doing so before committing to a large mortgage.
Renting is Often More Financially Predictable
We’ve seen in recent months that rates can fluctuate depending on economic outlook. The Federal Reserve spent most of 2018 raising interest rates, which had a direct impact on home mortgages. For fixed terms, this kind of volatility isn’t a problem. However, some more competitive adjustable rate mortgages can become expensive when the economy contracts and rates rise.
If you want more financial predictability, then renting will often be more appealing. Rental rates typically remain unchanged for extended periods of time, and you could always find a more suitable rental if the price isn’t to your liking when a lease is up for renewal.
You Can Save Time and Reduce Stress by Renting
Owning a home comes with a lot of responsibility in the form of maintenance and general upkeep. If you don’t have the time to take care of home maintenance or wait around for contractors, then renting could be the better option. Major maintenance and upkeep will be taken care of by the owner, with no out of pocket expense for you.
This could even give you more time and surplus income to focus on investments like stocks and bonds.
A Rental Could Give You More Flexibility in Your Career and Lifestyle
You could always sell a home that you own, but you wouldn’t come close to the same level of flexibility that is offered by renting. Home inventories are currently high, and homes can sometimes stay on the market for months or even years. This can limit your options when it comes to relocation and seeking new job opportunities around the country.
Renting, especially when you’re younger, could give you more freedom to make big life decisions.
Think Carefully Before Every Major Investment
Home ownership can provide long term value, allowing you to build equity throughout your lifetime. However, renting today isn’t necessarily a bad financial decision. In many cases you could save money and give yourself more flexibility to live the lifestyle that you want.
As with any financial decision, weigh the pros and cons with your unique circumstances. Even if you decide not to buy in the short term, creating wealth through equities and savings could give you financial freedom and stability for the years ahead.
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