Since I live in an expensive part of the country, I never gave a thought to buying a home. Everyone I knew, even successful people in their mid-thirties, rented. Then I started reading personal finance books, all of which said that I needed to quit renting yesterday. At first I just dismissed this advice because there was simply no way I could afford either the down payment or the monthly mortgage payments. Then, slowly, I started making a little more money, my household gained a second income, and I began looking at properties in a less glamorous part of town that I previously wouldn’t have considered. Suddenly, owning a home seemed like not just a possibility, but a near-future possibility.
I started going to open houses and found that almost all of the properties I looked at, regardless of how expensive they were, just weren’t the kind of home I envisioned having for the amount of money and effort that would be required to own them. I figured I would just keep looking and eventually I would find something, but then I lost my interest in looking. Here’s why.
Though thousands of people from all walks of life buy homes every year and aren’t necessarily well-educated about the process, for me, buying a home without knowing the ins and outs of every line on every piece of paper I’d have to sign wouldn’t be an option. So the first major piece of work in buying a home would be to research every aspect of it by reading lots of books full of information I had zero prior knowledge of. Then there would be the hassles of finding a tolerable and trustworthy real estate agent and mortgage lender, actually finding properties I both liked and could afford, making offers (and dealing with the heartbreak of losing out on great places to other buyers), and the major stress and chaos of actually closing the deal and moving. And that would only be the beginning–after that, there would be ongoing monthly homeowner’s association fees (I was looking at condos), potential extra homeowner’s fees in times when major repairs were needed, private mortgage insurance (since I would have a down payment below 20%), property taxes, and home maintenance and improvement expenses (which can come in the form of an untimely $2000 bill for a new air conditioner in August).
It’s true that by not buying, I’ll be missing out on benefits like pride of ownership and being able to modify my living space however I please, along with the stability of not having anyone raise my rent drastically or turn my apartment building into condos. I might also miss out on making a massive amount of money if my neighborhood keeps gentrifying the way it has been. On the other hand, I also might miss out on losing a ton of money by buying at the peak of a market that so many people think is about to crash (or already in the process of crashing, or at least leveling out).
Most personal finance books will tell you to buy a home because it will make you more comfortable financially in the long run. They say that the only reason you should rent is if you’re planning to move in the near future (since this might force you to sell at a loss and because of the high costs of buying and selling a home). People also like to mention that you can deduct your mortgage interest, but this really isn’t the fantastic deal it’s made out to be unless you’re already itemizing (if you have high ongoing medical expenses, for example).
Since I can’t predict the market, I have decided to base my home ownership decision on the things I actually have some degree of control over. I want to keep my options open. I want to have the ability to explore paths like starting my own business, working part-time, working in a low-paying field doing something I’m passionate about, taking a couple of months off from working to travel, or picking up and moving to another city. If I were locked into the high expenses of home ownership, I would give up all of these possibilities (or make them much more difficult), and for me that just isn’t worth it.
For me, the main purpose of having money is to have options, and to lock myself into a rather expensive thirty year mortgage plus expenses would take away a lot of that freedom. It would require me to maintain a full-time, well-paying job for the next 23-30 years (which is fine for many people, but not for someone with as many divergent interests as I have). Even though I calculated that buying a home might save me $200,000 over 30 years with modest increases in home values and rental rates (which, of course, I can’t really predict, and may well be overestimating), if I continue my current savings habits (very likely because I’m a saver by nature) I will probably be comfortable enough in 30 years anyway that the extra potential $200,000 will not have a major impact on my lifestyle or my freedom.
Whether it’s deciding whether to rent or own or making any other financial decision in your life, don’t just assume that because a personal finance book tells you something is the best choice that it’s the right choice for your situation. Think about your own values and goals in life, and structure your finances in a way that will allow you to live by those values and achieve those goals as painlessly as possible.