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I have never rented. I knew at a young age I would NEVER rent it just seems like a waste to me. You are paying someone elses bills and making them rich.
Lucky for me my dad paid cash for my 1st house a small 2 bed 1 bath 1000 sq ft hosue and I made payments to him (he charges intrest!) I ended up selling that house 3 years later and bought my current house.
We decided to buy because the market was good for buying and we really could use the first time homebuyers tax credit. Plus, our mortgage would be cheaper than renting a 2 bedroom apartment in our area. Lastly, we were/are planning on living in this city for at least 5 years....if it had been less than that, it may not have been worth the effort.
It's really a personal decision. It sounds like you guys are probably in a good position to rent for now. I rented my whole life, until FI and I bought a house 16 months ago. Renting is definitely not "throwing money away," you're getting a place to live out of the deal!
And don't forget: you're not just paying a mortgage when you buy a house. You also pay property taxes, homeowner's insurance, and (in a lot of cases) PMI. Not to mention all the repairs and things you have to cover yourself.
I love being a homeowner, but I think renting for many years and saving money was what helped me get there. Sit down and crunch some numbers with your FI and figure out what your best move will be!
@lilybay:thats how I feel too! I'm not "throwing money away" I get to live with the guy I love!! and that's priceless!
Yeah that's the other thing. Sure we could probably afford a house payment (if someone were willing to give us a loan) and we could afford utlities, and probably food for ourselves, but I can't imagine throwing home owner's ins and property tax etc into the mix. And god forbid if something major happened, like a broken water heater or a leaky roof. I think you're right, we just need to sit down and realistically figure it out. Thanks!
Renting CAN be the better deal depending on where you live. In many large metropolitan areas, the rent market is cheaper than the owning market. Obviously, the amount you are paying in interest can make it more or less expensive, and factoring things like yearly property taxes and homeowner's association fees can send the cost through the roof. How often you move should also be considered, as closing costs and realtor fees are very expensive. When owning, you are responsible for all repairs - whether you need a brand new roof immediately after a big storm, your water heater breaks, you need a plumber, what have you. Those costs add up a lot, too. If you rent, you have someone to do that for you - so it is a convenience thing. I look at renting as paying for a serivce. It is cheaper to rent than buy in my neighborhood, and we save/invest heavily outside of our housing. It really is a matter of choice. We rent, and are flexible to move, try out new neighborhoods, have a handy man at our beck and call, and our heat and hot water are paid for! (a must in Boston, heat costs $$$$ here!)
I'm currently looking to buy a house with FI. But we can only afford to do that because I've been living at home and was able to save up enough for a downpayment. FI rents, but he had no choice as he moved here for a job straight out of college and had no intention of staying put here until now. We intend on getting our forever (hoepfully dream) house on this first shot, no buy small upgrade later hassle. If we don't find a house by the time we are married, then we'll have to rent together until we find that house.
If you plan on staying put for at least 5 years, buying may be the way to go. But at the same time, if you can save money while renting and fix up that credit score, you may be able to save more in the long run. It really comes down to 1, what your plan is with this house, and 2, what the real numbers work out to be.
we decided to buy because of the market, my rent for a 1 bdroom apt was only $150 cheaper than my half of our mortgage. it didn't make sense for us to get a bigger apt and waste both our money with it going out the window on rent, when we could build equity (crossing fingers) in our own home.
after this wedding, we will also be able to save at least $1000/month between the two of us; plus FI did a good job of saving up his nest egg for my ring/downpayment on house/savings account.
i do see the benefits of apt renting, in that there's not much liability for things going wrong. we've been living in our house for a year n although we're lucky that it was move-in ready, we've spent money on fixing appliances, sump pump, outdoor renovations for safety, and ohter unexpected maintenance bills that comes with being a homeowner.
We rent, basically because we can't afford to buy a house right now and we don't have anyone who will buy one for us. We love the area we are in and payments for a mortgage in this area for a house the same size as our apartment would be double the rent, it just doesn't make sense. Plus we don't have to pay for repairs or property tax, there's a pool, a park, a hiking trail, plenty of parking, and its actually just perfect for us. Eventually we want to own a home but its just not practical right now. We are able to save about 400 dollars a month in our house fund and we will add to that after FH's car payment is up in 3 months. For were we are in life right now, renting makes the most sense.
I think its completely a personal decision based on individual circumstances, and renting is not always a bad idea.
My FI and I rent separate condos right now & will rent a bigger townhouse together for a year or so after we get married. We want to take a year to build up our savings more for a bigger downpayment for when we do buy, put aside some money in case we have any maintenance needs, and to get a better idea of what area we want to own in.
Buying a home is a huge commitment, and you definitely want to have some rainy day money saved up, above and beyond your mortgage. Several of our recently married friends have had incredibly expensive and time consuming issues to deal with in their new homes (foundation shift, water heater breaking and causing mold, broken garage door, etc. etc.) They had to supplement their insurance to cover these items. And they had to oversee the work. If something broke in my condo right now, I would call my landlord and he would pay someone to fix it. I like that convenience. I don't want to spend my first year of marriage fixing problems if they arise.
There are tons of positives to home ownership, but I don't think you need to be in a huge rush just because there is some perceived idea that renting is "wasting money". I think its a very smart decision to save first, buy later...and spend the time researching where you ultimately want to own your home.
Goodluck with your decision!
@pinkshoes:yes the real numbers will unfortunately be the final decision makers. damn you real numbers! I think we all like our "fantasy" numbers better :) congrats on buying a house though! I know we'll get there someday.
i've posted about this before---we rent are renters by choice.
it is cheaper to rent a place in austin than to buy. we are not willing to move to the 'burbs where housing prices decline significantly. we could afford a decent, small place in the city but we have no desire to pay for home maintenance these homes would need--we don't want a "fixer-upper". we would rather stash our cash in our retirement accounts, buff up our savings, and buy a home when we feel the desire to own one.
we both make decent money, we don't have kids, we don't have large pets, and we like our urban condo lifestyle. so we're staying put for at least 2 more years.
=) I think I threw the 'real number' comment in cause I'm so used to talking to FI. He loves to think that like invesetment ideas or business ideas are GREAT jsut from pulling complete guesses out of the air and then wonders why I'm not enthusiastic or supportive.. and I'm always like, we need to do real resarch and get real numbers stop getting exicted over your made up guesses..
It's been really hard to find a house. We've been looking every Sunday the last 2 months or so and have visited at least 30 at this point. The biggest sticker shock to us was how much property taxes (600-800/month depending on the town) and 'regular' living expenses are. We calclated the non mortgage and tax critical expenses (water, heat, gas, tv, cable, food, insurace, etc), and they came out to almost 1k/month on their own! Theres some good spreadsheets out there that break it out really well and list every expense you can think of. Then I asked around friends in the area tht own and stuff for some real numbers. That should really help with figuring out the real cost of ownership on top of just the mortgage.
Good luck!
We love renting for now because it's the only way to afford living close to the ocean. I commute 33 miles each way inland (against traffic) so that we can live in a nice beach community. We haven't had much of a summer (weirdly cool and cloudy), but that means our electricity bills stayed low.
We'd like to buy in six months or more, but we'd have to move inland and possibly on the other side of the Orange Curtain. My commute would be shorter, but we'd be farther from most of our friends who live in Los Angeles.
In our area (San Francisco) renting is almost always a better financial bargain. There's a good rent v. buy calculator here which will let you plug in the numbers for your own situation. Basically, it depends on the ratio between rental costs and home prices in your area, as well as property taxes, and how long you expect to live in the home.
I totally understand the psychological urge to nest, though!
I don't look down on renting. A lot of people don't think about the extra costs with homeownership. You have to pay more for utilities, maintenance, taxes, insurance, etc than you would with a rental property. Personally, I don't believe anyone should buy a house unless they have a downpayment (preferably 20%) and a few months in savings in case you have an emergency like a broken furnance.
I don't think rent is 'throwing money away' since you are paying for a place to live and you are still having a place to live. Homes aren't really great investments, hopefully you get the same amount back when you sell but with real estate, you might end up getting less after expenses and such.
If it was a choice between living apart for longer in order to buy, or moving in together and renting, I'd choose renting every day and twice on Sundays :) Generally I think renting is a waste of money but if you can rent something and still save enough to buy a house, even if it takes a bit longer than it would otherwise, then I think it's worth it if you get to live together. I think the mistake people make is in not wanting to lower their standards or sacrifice anything - if you are happy to live in something that's less than ideal (not dangerous, or disgusting, just not your dream house or as nice as your parents' house) and save money for something better then go for it :)
I think renting is underrated. It is much more worry free, and probably smarter financially. Think of homeownership as an investment in real estate, and then, in effect, you rent to yourself. Most people put too many investment eggs in the real estate bucket, IMO and they don't spread their money around. Thus if the housing market goes bust, they really struggle.
We bought through a first time home buyer's program. It is cheaper to buy in my area than rent usually. I will say that I do think renting is easier in some aspects. Our apartments were always newer and felt cleaner to me. They were easier for us to maintain because they were smaller and didn't have yards or appliances that could break down and need fixing.
There are many freedoms to living in a house though. You'll just have to write out your own pros and cons list and figure it out between the two of you.
Renting is not always a bad thing. Unless you are living in a super-expensive place. If you are living in a reasonably priced place, you will have lower monthly expenses. This will help you work on your credit and build up savings for a down payment. Don't underestimate the down payment--it is a huge factor for banks these days, especially first time home owners.
As a couple other people said, owning a home is more than just your mortgage. Something can go wrong and you could have a $3,000 immediate repair on your hands. In many metropolitan areas (NYC for example) most people couldn't even consider buying.
If you are not plannning on staying in your current city more than 5 years, don't even think about buying. Take it from someone who owns a home in one city they can't sell, FI owns a home in a different city, and my renter is a dead beat that it is currently costing me $$$ to evict.
When you are truly ready, owning a home is a great thing. But make sure you are ready first!
I don't see a big difference between renting (paying money to a landlord) and buying (paying money to a bank). The current foreclosure crisis should cement in everyone's minds that homeownership is not a sure investment.
I honestly think renting is better for a few reasons: mobility and no maintenance. People that own homes can't easily move to a new city for better work options and they have to pay for every. single. thing. that goes wrong. If my garbage disposal stops working, I call the maintenance guy and then go out to dinner. If so much as a lightbulb goes out, I can call someone. I have no lawn to mow. I don't pay property taxes.
In a lot areas renting is more affordable than buying -- there are many online tools that can assess this. And I really think the idea that renting is money down the drain needs to be dispelled. It's not down the drain -- you have a roof over your head and many amenities. Homeownership should probably be viewed the same way.
Also, people save for homes all the time while renting! :)
Are you currently each living with family?
I think renting would be a great step in the right direction. You can get used to paying bills/utilities and also get used to living together, without the added pressure of a mortgage and property taxes and all that.
I totally agree w/ others who say renting is underrated and is not at all "throwing money away." Think about it - whether you rent or buy, each month you have a "housing payment." Either you pay a landlord a rent check (and never have to give a second thought to repairs, etc) or you pay a bank a crapload of interest (for the privilege of painting the walls whatever color you want).
Of course, there are real upsides to owning (especially if you plan to stay put for the long haul). You can buy a house in time when you're ready... nothing at all wrong with starting out in an apartment. I'd guess that's what the vast majority of young people do. It shouldn't prevent you from saving for a house if you're smart about getting in an apt you can afford comfortably. Try setting up an automatic deduction from your paycheck that goes directly into a "house savings" account. It will really add up over time if you don't touch it.
@pinkshoes: jeez, where are you from? That sure is a lot for property taxes! I think ours are only around $100/month.
@BrianneG: FI and I are just moving to the South Bay too! I commute to work in Glendale....I feel your pain.
I wish we lived in an area where buying was comparable to renting, but it's just not possible. We're happy with renting because it makes the most financial sense. Even so, we are both working harder to someday even think about buying a 300K shack in L.A.....womp womp womp. Nesting is a powerful tug!
So, sometimes I sense that homeowners have a little bit of a sense of superiority over those of us who rent. I mean, why would someone say you're throwing your money away when you rent? You NEED somewhere to live. If you "own" your home, you technically are paying the banks bills til you have the house paid off. So at any time if you miss a payment they can take what is supposedly yours away.
Honestly it's really just a personal decision. I do want to own a home, but at this time it's better for us to rent. Like you said, we don't have perfect credit right now or a down payment on a home that is suitable for us.
Renting will give you guys an opportunity to live together sooner and save up some more cash to buy a place that works for you.
First off, we just bought our first house and we love it - but I have to say that I absolutely don't think that renting is like throwing money away! Hardly anyone can afford paying cash for a house and a mortgage is a little like paying rent, with the landlord being the bank! I know that equity plays a huge deal but it also takes a lot of money for renovations and not to mention the time and effort it takes to fix small problems (vs. calling management to fix it).
In my opinion, it depends on your intention for buying. Are you buying with hopes to sell sometime in the near future? Or do you want a forever home to build a family in? People usually fall in between these two extremes.
If I were you, I would rent! That way you and Fi can be together ASAP! You can also save money together (which is easier to do while in the same household) and build your credit up together. I know some people have issues about living together before actually being married, but if that's not that case, then I say, go for it! It doesn't mean giving up on your dreams of a home ... you can still do that and I think that renting first will let you take your time when you do house hunt.
I hate renting ughh. I have horrible neighbors and they even caught our aparmtent building on fire after we just moved in two weeks prior. I'd MUCH rather own. We're spending 7200 in this place for a year of rent. We looked into buying a mobile home that came with land it was 5500 and we could do whatever we want to it!
I'm the worst person to ask but I HATE renting and feeling on guard when the landlord is over and stuff. To me it seems like pointless money too, but we have no credit and this is our first apartment so we have no way to get a house loan at all.
Renting is the way to go if you are honestly, truly, not ready for a home or cannot afford one. I rented in college and shared a $550/month apartment with a friend and only paid about $300/month after utilities. It was affordable. A mortgage was more than three times that, so it wouldn't have been a smart choice.
Renting sounds ideal for you, though! Owning a home ties you down--for us, we KNEW we were staying in St. Louis. So we bought what we could afford, bought smart, and are putting sweat equity into it so we can profit off it in 7+ years. It was the right choice for us because of where we live. But there have been times in both our lives where renting was the smart choice.
I rented for about 3 years and the boy rented for about 7 or 8 years. In the Boston area, rent is insanely expensive making it difficult to save for a down payment. We just bought a house but our mortgage is exactly $75 more a month than our rent (that does include our property taxes and homeowner ins.). However, we had to buy a house 45 minuts away from where we work-which is actually in another state-just so we could afford a home we love.
Like everyone else has said, owning a home is lot more than just mortgage payments and utilities. We had a lot of "stuff" when we moved in and Im still amazed at how much we had/still have to buy. Constant repairs, home improvements, paint, etc. We love it, but it really is a constant money pit!!
Look into first time home buyer classes in your area. We took a free class (2 days, for 5 hours) and we learned sooo soo much information about the whole process. Including how to figure out what you can afford and how to budget for it. You may even qualify for programs that will help you with the down payment.
@XxMyXxDecemberXx: I don't really see what that has to do with renting though...in fact, I would say it's good that you're renting, because you can eventually move away from your crappy neighbors! Whereas if you owned your apartment, you'd be stuck there for much longer.
@ribbons: totally agree with everything you wrote!
I think it depends on your situation. Buying (imo) doesn't make sense unless you are sure that you're going to stay put for at least 5 years. With closing costs, prepaids, moving costs, etc etc etc if you stay less than five years you'll probably lose money. If you will stay put for longer than that and you can afford a place you'd be happy staying in for 5-10 years, i think buying makes a ton of sense.
One other thing to consider though is that interest rate is VERY important. If your credit isn't good it might cost you a lot more in the long run because you'll have a high interest rate... so waiting a year or two until you can repair your credit might save you a lot of money.
Our "break even" is about $3500 for us living in NYC. As long as we can find an apt for less than $3700 (which we did - and no it wasn't as simple as it sounds), it's more financially sound to rent. That said, now that we're married we're going to be crushed with the AMT and owning may have beneficial tax implications over renting (area-dependent). I think it's a very personal and case-by-case situation, but both renting & owning have their pros & cons.
We are planning on renting for the first few years that we're married. I'll be a student still, and he's getting his Ph.D that December after. We both agreed that while we would love to buy a house, it would be really irresponsible since we won't be making a whole lot of money at the beginning. Plus, we want to make sure it's going to be a place where we'll stay for awhile.
@BrianneG: This is exactly why we don't own...we literally live a 5 minute walk from the beach at our apt. in Marina Del Rey.
To find something similar (and we're location snobs; we want to live west of Lincoln/PCH) in our dream neighborhood, we'd probably pay twice the amount of our rent, & that's with a 20-30% downpayment & NOT including HO fees, Property taxes, or insurance! We're happy to wait...living our lifestyle is more important to us than owning a house.
Plus, we're not the city where we'd like to plant roots...that'll either be Marin County (just across the Golden Gate bridge from SF) or Kula, Maui. So, if we're not even in love with our city, it doesn't make sense to put in all the hassle of buying a home.
ETA: 'Tho, that doesn't stop me from learning from all you home owners & your sage advice! ;-)
I think it is totally dependent on your location and how long you intend to stay in a home or apartment.
This calculator might be helpful.
http://www.nytimes.com/interactive/business/buy-rent-calculator.html?hp
You can see that in some instances, buying is the more prudent decision, but in a large number of cases, renting is the more financially responsible decision.
The idea that everyone needs to own a home is (and has always) been a fallacy. Renting in some cases, will save you more money in the long term.
I think renting is a great start to your life together - you can get used to living together and try out a few different neighbourhoods while you save up that deposit.
We made the decision a year ago to buy a house beecause the government was offering first home buyers a lot of incentives ($12k of them!) and the market was going through a very small slump so house prices were slightly lower than they have been. We got a good place (a unit, so its our starter home) and in 5 years we will likely look at moving again. For us it was a great move - house prices have since gone crazy in the area and I love the freedom of being able to paint and do what you want with the place!
But I will admit to being surprised by the extra costs that are associated with home owning - rates, higher bills (in Australia if you rent you just pay for the water usage, but when you own, you pay for the connections to the pipes. so a $30 bill blows out to $150)
Just do all your sums - see a financial advisor and figure out what works best for you!
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Fiance and I have discussed the pros and cons of renting several times, and we've always agreed that buying would be a better option, we feel like renting may make us unable to save money (due to having rent/utilities to pay), and it wouldn't be worth it, etc.
However I've been browsing apartments and doing the math, and I feel like we could totally afford rent, and be able to still save a few hundred dollars a month. Also neither of us have squeaky clean credit, and many of the apartments I've been looking at either claim that they do not do credit checks, and just from personal experience (of having various friends and family members live in these complexes) I know that these certain apartments are more lenient than say..a bank giving you a home loan.
The other reason I'm daydreaming about renting now is because I cannot stand not living with him. It is literally driving me insane. Due to our work schedules we hardly ever see eachother during the week anymore, and on the weekends we're both so burnt out from work we don't really spend a lot of quality time together.
Then of course theres the whole "nesting" urge. I have all of this stuff..just sitting packed away waiting to be used, taunting me! lol
Also getting a house is going to take us so much longer. We're going to have to save more money, clean up our credit a little more (which we are working on regardless), we're just going to have to have more money available is the bottom line. And I am just so tired of waiting, I can't stand that we've been together over 3 years and he's still not the person I come home to at night.
So what are your opinions ladies? Owning or Renting? Which do you feel is better for you and why?