Keep Renting or Purchase?

KristiLyn Wilkinson, M.S. AFC Candidate
Empowering Financial Wellness Program Coordinator 

​Housing is often the largest expenditure that people make. If you take the full 30 years to pay off your mortgage, you can pay as much as three times the original amount you purchased. Owning a home is a big part of the “American Dream” for many people, and while it is true that homeownership builds stable communities and may help you build wealth and equity, that doesn’t mean it is right for everyone in every situation. There are many factors that come into play when considering if it’s the right time to purchase a home or if you should continue to rent. Here are a few things to consider.

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1. Your own financial situation. Do you consistently stay within your budget each month and are you able to put money aside for savings? Experts suggest that you save at least 1% of the value of the home in a savings account each year to cover the cost of repairs and upkeep for your home. It’s also important to build a good credit score that will allow you to qualify for a loan. 
2. Your current employment situation. Do you plan to be in the area for at least 3-5 years? How likely are you in the current economy to lose your job? There are upfront costs associated with purchasing a home, and if you won’t be living in the home long enough to recoup those costs, it might be a better financial choice for you to keep renting. 
3. The economy. Are interest rates high or low? Are we experiencing high levels of inflation? Is it a buyer or a sellers market? These factors could vary from state to state, and they could even vary widely from county to county, but they could significantly impact your ability to purchase a home. 

It’s common to hear people say “I don’t want to rent, that is just throwing money away”. However, “throwing money away” is really about the bottom dollar, right? If I am saving and investing more money by renting than by purchasing a home, am I really “throwing money away”. I would say you are not.  Let’s say you live somewhere like California where housing is really expensive. If you could rent for significantly cheaper than you could purchase, and you invested the difference in a low-cost index fund, you might come out more financially ahead than if you purchased and owned a home during that time period. On the flip side, maybe you live somewhere where it is significantly more expensive to rent than it is to own a home and it makes more sense to purchase. 
 
The important thing for everyone to remember is that neither of these options is morally superior to the other. It is not “better” to rent or “better” to purchase a home.  What matters is that you identify what is important to you, evaluate the options, and make a decision based on what makes most financial sense for you and your family. Purchasing a home before you are ready to take on all of that financial responsibility can actually set you back on your financial journey, so don’t rush into homeownership because society has taught you that it is the “right” thing to do. However, if you have decided you are ready to purchase a home and your ducks are all in a row then go for it! It can be scary and overwhelming purchasing your first home, but you don’t have to do it alone. USU Extension has a homebuyer education course for first time home buyers! It will walk you through everything you need to know to be prepared when purchasing a home! To learn more about the course click here!