Buying a home has long been seen as a hallmark American financial achievement. While home ownership remains a significant milestone for many, owning a home is not necessarily the right goal for everyone, and there are many advantages to renting a house or an apartment.
In fact, many young people today are delaying buying their first home for a multitude of reasons. The home ownership rate among millennials between the ages of 25 and 34 is about 8 percent lower than it was for Gen Xers and Baby Boomers when they were in the same age range, according to CNBC. Millennials are getting married later, postponing having children, struggling with student loan debt, and are moving more often than previous generations. That being said, some millennials prefer to rent because it aligns better with their lifestyle and their ambitions.
One sentiment that has been perpetuated by some personal finance experts is that if you’re renting, you’re throwing your money away instead of investing it. But choosing to rent doesn’t mean you’re ignoring foolproof sound financial wisdom. That’s because no financial wisdom is foolproof or entirely objective—it must be customized and applied to your specific situation, including the city you live in, your finances, your priorities, and more. For financial and overall well-being, we need to balance solid data and predicted outcomes with our own personal values and the financial scenarios we’re in right now.
There’s nothing wrong with aiming and saving for home ownership, but there are plenty of people who wisely decide to make rent payments (money that is well-spent on a place to live). We all share the desire to have a residence that is safe and stable, and there should be no space for judgment about whether someone cultivates a home by renting or by owning.
Home ownership has many pros: the opportunity to build wealth, more space, total control over renovations, greater privacy, and financial freedom (once you fully own your home, you have no more mortgage payments).
But home ownership also has its disadvantages: it’s a huge financial commitment, it’s more difficult to relocate or travel long-term, you have to pay property taxes, homeowner’s insurance, and all maintenance costs.
There are a few reasons why, for some, renting may be a better option than the home ownership route:
Your debt-to-income ratio is high
Your debt-to-income ratio is the percentage of your gross monthly income that you spend monthly paying off your debt. A high ratio can mean that someone has too much debt relative to their income. Think about it this way: if you already make sacrifices to manage your monthly debt payments, taking on a mortgage could put you in an even tighter spot. Plus, being under a certain debt-to-income ratio threshold is often required by a lender before you can qualify for a mortgage. If this applies to you, you may want to pursue debt pay-off more aggressively before you consider buying a home.
You crave convenience when it comes to upkeep
A quick anecdote: within a few weeks of moving in, two water heaters break. One belonged to a friend who bought the home and dealt with a flooded room, home insurance, and contractors. The other was in a friend’s apartment; she called the property office, they had someone out to fix it the next day while she was at work, and they gave her a hefty rent credit. When things break, the scenarios are quite different depending on whether you’re renting or owning. If you like to be hands-off and don’t have the time, energy, or desire to deal with inevitable house repairs, you may want to keep on renting until you do.
You desire flexibility to relocate
The exact time frame varies, but one standard piece of financial advice is to own a home for five years before selling it for the investment to be worthwhile. If you want to be open to moving for a new job offer or a partner, renting is the most flexible option. You can still put down roots and build a community as a renter, while having the option to easily cancel a lease and leave if you need or want to. Today, more single people are purchasing homes than ever before (single people made up 25 percent of first-time homebuyers in 2018). Still, meeting someone across the country would present certain challenges, as a single homeowner shared in a Verily column. Ultimately, how much you prioritize flexibility in your unique situation will guide this decision.
You’re going through a stressful season
Buying a house is a huge undertaking with a medley of decisions to make. It may not be a good route to take if going through this process is going to harm your mental health or cause undue stress. While many homeowners gripe about the home-buying process, if it represents a serious burden or weight, renting may be a smart choice for now. Of course, experiencing a stressful season shouldn’t be the sole factor for abandoning home ownership if it’s your top priority. In that case, make sure you’re at peace with the decision and fully ready to commit to the process.
Decide what works best for you
If you don’t own a home yet, have you thought through the various factors involved in the home ownership equation? Pencil in a half-hour in your agenda to reflect on your financial situation, revisit and order your goals, and make a roadmap that makes sense for you. Maybe you decide to rent for one more year while continuing to save for a down payment. Or perhaps buying a home is a longer-term goal. Regardless of what you conclude, keep your individual needs, desires, and plans at the forefront and you’ll be sure to make the best strategic decision for you or for your family.