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Real Life On A Budget

Rent or Buy: Which is Best for You?

For most people, buying a home is the largest financial decision they will ever make.

Whether you pay with cash or take out a mortgage, you’ll probably spend hundreds of thousands of dollars on your living situation over the course of your lifetime.

When it comes to buying a home, the key is knowing when it’s actually the right time to buy one. Sometimes you’ll be better off renting for a few years to prepare yourself for the financial reality of a mortgage.

With that in mind, let’s take a look at when it might make more sense to rent.

1. When you’re fresh out of college.

It’s simply not smart to buy a house when you’re just out of school. You have too many unknowns to think about—like where you’ll work, whether you’re in a relationship, and whether you really have enough money for a mortgage in the first place. You have so many transitions and changes after graduation that the last thing you need is to be tied down to a house.

2. When you’re moving to a new city.

I can’t tell you how many times I’ve heard of people who move to a new city and buy a house right away, only to realize later that they would rather live in another part of town. By renting for a year after you move, you can learn about all the different areas of town and decide which one best fits your needs and budget.

3. When you’re a newlywed.

I always recommend waiting a minimum of one year after you’re married to buy a house. Just like the other situations, newlyweds have so many transitions early on. Job and income situations may change from year to year, so locking into a mortgage probably isn’t a smart idea.

Related: 7 Money Tips for Newlyweds

Now, are there exceptions to these situations? Of course!

If you’re an older newlywed who has owned a house for a while, then it makes perfect sense for your spouse to move in after you’re married.

If you’re already familiar with the town you are moving to, and if you’ve already saved a down payment, then there’s nothing wrong with buying a house after your move.

There are always exceptions. The key is to make smart long-term decisions with your hard-earned money. And when you know that you’re both emotionally and financially ready to buy a home, it’s important to work with a real estate agent that you can trust. They’ll help you find the best home for you and your budget.

Don’t buy into the perception that renting is somehow a bad idea. You’re not wasting money you could use on a mortgage. Instead, you’re showing patience, discipline and good stewardship of your income.  

Remember, your goal is not just to buy a house—it’s also to make a good investment. You should never buy a house simply because you can. You want to find the situation that works best for you.

Related: Are You Ready to Buy a Home?

If you jump into a mortgage before you’re ready, you could make a major financial mistake that could set you back years.

 

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  • I am curious if you disagree with James Altucher in this blog post – http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/ nnnIt is a lengthy post but the financial section is what i am referring to here. Your article implies that the ultimate goal is home ownership. James makes a case for that being a poor investment. Would love to hear your take on it.nnnThanks!

  • Meagan

    Thank you for this, Rachel! I’m curious to know what your take is on military families renting vs. owning. My husband and I move around every 3-4 years making renting a more appealing option that buying a home. But, at the same time, we also feel we’re missing out on building our equity. I’d be interested in knowing what your thoughts are on this subject. Thank you and congratulations on expecting your first child! 🙂