When buyers are looking to pay low interest on a mortgage, investing in property sounds quite appealing. But, when it comes to buying a new home, just because you can do it doesn’t mean you should. In most cases, renting a home may prove to be a more financially sound decision, especially when looking for property in the bay area.
Are you thinking about buying a new home? Here are eight reasons why it may not be wise to buy the property and why you should consider renting a home.
8 reasons why you should rent and not buy a new home
1. You’re Low on Savings
Maybe you have the money you need for the initial down payments and your monthly house payment, but buying a home is a considerably more significant investment than just those initial payments. Many loan officers and financial consultants suggest that buyers must have three to six months of financial reserves saved up for necessary budgetary requirements when thinking of purchasing a new home.
Additionally, suppose an individual doesn’t have a lifestyle of financial wellness that protects them from life’s uncertainties. In that case, they show that they do not have the resources to be responsible for an asset/liability worth a significant sum of money.
2. You Probably Won’t Live in a Home Long-Term
Before you finalize your decision to buy a home, think about the duration of your life you plan to live in it. Are you planning to live in the city just for a few years? Can your housing needs change during that time? If both of these questions are yes, then renting is the better option.
Additionally, buying a new home comes with numerous closing costs. Not to forget, if you plan to move out too soon, you may have to pay tax penalties, depending on the location.
On the other hand, you don’t have to think about those questions when opting for a rental property. Moreover, the bay area rental market can provide you with some exciting options when looking for a property. Depending on your needs, you can decide to live in a furnished or unfurnished property.
Moreover, you get to choose from a vast range of options. And all the cost that comes with a rental property is upfront, leaving no room for confusion and discomfort in the long run.
3. You Just Moved to a New City
Got transferred to a new place? If you intend to stay there for the long term, buying a new home may seem like the right thing to do – until you decide you don’t like the area you brought property in.
Experts recommend renting in a new city until you know the neighborhoods and school districts in the surroundings (if you have kids or plan to have them soon).
4. You Have to Pay for Student Loan or Credit Card Debt
Buying a new home is often considered a “good debt” because you earn equity in the house over time. But before you can take advantage of that investment, you must pay for your higher-interest obligations.
If you already have a huge amount of student loans or credit card debt, it’s better to pay down your debts than invest your money in purchasing a new home.
Suppose your student loans, credit cards, and car payments have higher interest rates than your mortgage. In that case, you are bound to pay more interest over time if you don’t prioritize them – especially if you are paying the minimum on your loans because of your substantial house payments.
5. You Might Want to Switch Careers
Until or unless you take care of all the potential tax penalties, investing in a home binds you to one place – which means you might not be able to take advantage of more lucrative job opportunities in other locations.
On the contrary, renting is a better option for anyone who hasn’t found a stable job, changes often, or is thinking of switching careers. And if you don’t know where you will locate your next job and whether your salary would be enough to support a house payment, renting a home is a more rational choice.
6. You Live With a Significant Other
When you are in a committed relationship, it is better to find ways to make it more stable before making a huge investment like buying a new home.
Are you in a new relationship or a relationship that may not work out in the long run? If so, real estate experts suggest that buyers should avoid the long-term commitment to purchasing a home with their partner.
Also, if your relationship with your partner is not what it used to be, renting until everything comes back to normal or the relationship is over is a far better option for you.
7. You Don’t Mind a Landlord
Owning a home is a great responsibility. From repairs to renovations, yard maintenance to shoveling, you’ll have more expenses to deal with – and chores – with your new owned home.
If you want these things to be taken care of for you, then experts recommend that potential home buyers should find a rental property where they have a landlord. They will deal with all the aforementioned responsibilities, which takes them out of the equation.
8. You Are in Seller’s Market
Being in a seller’s market means it is not so great for buyers to buy a new home. Before you start looking for a property, talk to a real estate agent and know his views on the market’s current situation.
If you are in a hot sellers’ market with inflated property prices, it may be better to rent a home or wait until the real estate market turns in your favor. Because the last thing a buyer wants to do is purchase a property with inflated prices.
To Sum it Up
For many, buying a new home is on the top of their bucket list. But in most cases, renting instead of making a massive investment of purchasing a home is a more rational decision. So, if you are planning to buy a new home but don’t know if it’s the right time for you to invest, renting a home might save you from a lot of trouble and resources.