We rent the home we currently live in. Often when people find out we rent, they ask us why we haven’t bought a home where we live yet, since we’ve now been here nearly three years. Most people assume it’s because we won’t be in the area for long, which could be. We don’t really have any plans for how long we will live here, knowing that it could be a few more years or it could be where we stay forever. We’re okay with either option. I’ve even had people, when finding out we rent (a very small house at that), assume it’s because we are struggling financially. I know there are others out there who rent, and wish they could
buy finance a house, but I think you should stay a home renter for a little while. And I thought that I would tell you why.
While Carl has a great job and we could choose to take out a mortgage if we wanted to, we don’t feel that it’s the wisest decision for us financially right now. Here’s why:
Monthly costs to rent where we live:
Renter’s Insurance: $12
Utilities (on average): $150
Total Monthly Cost to Rent: $762
To make it even, I’m going to use a house that is comparable to what we live in now. If we were to realistically buy a home, it would be much different from what we live in now, but this is only for comparison sake. I am using a small home, one with two bedrooms but a third in the basement, meaning it has room for expansion. The house we live in now is two bedrooms, but we have an unfinished basement we could use for living space if we owned it and put a little work into it. The house is listed at $150,000, which is a very low, reasonable price. So the following figures are for a home that is financed for $150,000 with a 30 year fixed mortgage, a 5% interest rate and a 20% down payment (thus no PMI).
Monthly costs to own a similar home where we live:
Mortgage Payment: $956
Property Insurance: $45
Average Utilities: $150
Property Taxes: $122
Total Monthly Cost To Purchase a Home: $1,273
Monthly Savings to Rent vs. Buy: $511
Yearly Savings to Rent vs. Buy: $6,132
This is obviously an estimate. It is pretty cheap to live where we live compared with the rest of the country (our cost of living index is around 85, I believe). And the thing is, if we were to buy a home we would probably spend more like $250,000 so the costs would be significantly higher. This cost breakdown does not include maintenance and upkeep of the home either.
Our theory is that by saving and investing our current savings of around $6,000 dollars per year, our money is multiplying. While we would get a small tax break from financing a home, it is trivial compared to the amount we can save monthly. So yes, someday we will own our own home. But when we do, we will actually own it, not just finance it. I don’t consider taking on the responsibility of a mortgage, essentially more debt, to be “owning a home” as so many people love to claim. If that is what works best for your family, great. I know that the way we do things isn’t what’s best for everyone, but it is what’s best for us. And we have reasons behind why we are making the choices we make, rather than being “stuck” in a rental as some may assume.
So if you rent your home but are longing to buy, maybe take a step back and look at your situation a little differently. You may be in a place that is a blessing, an opportunity to be patient so you can be a homeowner without the stress later on in life.