John and I have been discussing a lot about our plans for the future, especially when it comes to when we will purchase our own house here in North Carolina. While interest rates are low, the housing market seems to have creeped up a bit over the past year. Since John just started working for himself in September 2014, the soonest we could purchase a home would be in September 2016. But, we think we are going to wait even longer to purchase a home unless the market suddenly takes a huge dip. Buying versus renting has been a frequent subject of conversation here in our household!
Here’s why we like renting:
We know exactly how much we’re going to spend every month. If something breaks, it’s not our responsibility to pay for the repair. It’s very easy to have an exact monthly budget when you know exactly what your bills are going to be each month.
We like that we’re not trapped to a mortgage. Remember my last post about traveling in an RV with kids?! This would not be possible if we had a mortgage. Sure, we could travel in the RV for a few weeks at a time here and there, but we’d be paying our monthly bills in addition to our adventure. The main appeal of traveling in an RV was the fact that we would only be paying for our traveling expenses.
We’re not stuck somewhere. I mean this in both the little picture (what if we don’t like the neighborhood?) and the big picture (what if we decide not to stay in NC long-term?). We owned a house in Arizona and while the profit we made helped us move across the country, the actual selling of the house was a huge hassle. I really really like the feeling of not being “trapped.” If we were to buy a home and the market went down, we very possibly could be underwater in our mortgage and “stuck” with it for God knows how long.
Our requirements when we do go to buy a home:
This is not to say we will NEVER buy a home, I just want to make sure we are really really ready when we do. In Arizona, we got lucky – extremely lucky. We bought when the market was low and sold when it was high, making a decent profit in just two years. But in all reality, we rushed into the purchase. We didn’t love the neighborhood, the house was cute but was kind of “blah” and it didn’t have a kitchen that opened up to the main room (huge requirement for me!). This time around, we’re going to be picky!
We want to have a LOT in savings. I’m talking $100,000 minimum. A few reasons for this – for starters, we want to put 20 percent down to avoid paying mortgage insurance. If we buy a home for $250,000, we will need $50,000 down plus any fees we have to pay. We don’t want to completely drain ourselves when we buy a home. Plus, we may have to make a few repairs before moving in.
We want to be in one of our dream neighborhoods. We haven’t quite decided if we want to be in a neighborhood or more out in the country, but we want to be certain with whichever route we decide to go. Waiting to buy a house will allow us to really think about where we want to be. If we do choose to be in a neighborhood, we can be picky and wait until a great house pops up in our price range. Waiting also gives us time to explore more areas of North Carolina so we can pick a place we really love.
We want to be certain buying is for us. Anyone that knows John and I know that we tend to make quick decisions and we love change. We love traveling, we love seeing new places and we love exploring. Who’s to say we won’t want to move again in a few years? (I will say, once our girls start school we are staying put!! We don’t want them to move around their whole childhood!).
We may try and pay cash for the home. If we go this route, we will lower our budget and spend a lot of time traveling when the girls aren’t in school. Our decision on if/when/where to buy (and how much to spend) really depends on how much money we’re able to make over the next few years. Realistically, we will rent for at least three more years and then re-evaluate. While it’s fun to daydream about owning a home, we both know that it’s not something we’re ready to jump back into yet. We love the rental home we’re in now and hope to be able to stay here until we go to buy.
Do you own or rent your home? If you rent, when do you plan on buying?
photo credit: Flickr via Photo Dean
Jayleen @ How Do The Jones Do It says
atWe currently own our home but I remember the carefree days of renting! They both have their advantages and I love owning a home but I do sometimes miss the days of renting.
Sarah Brooks says
atAgree!! I’m enjoying renting now since we are new to the area, but I’m excited to own a home again when the time is right! Renting a house never really feels like “ours” and I don’t want to spend money decorating it nicely since it may not go with the home we end up buying.
Tarynkay says
atWe own our house. We bought near the bottom of the market. We rented in our neighborhood first and knew that we loved it before buying. If we didn’t currently own, we would probably not be looking to buy right now, since housing prices are higher at the moment.
I definitely agree about the advantages of renting! But we have been able to build a lot of equity here since we bought low in 2009. The mortgage on our house is also lower than we could rent even a one bedroom apartment for, so that is nice. We have no plans to move, so I am glad we bought when we did.
Sarah Brooks says
atAhhh 2009 was a great time to buy!! We bought in 2011 and it was also at the bottom of the market so when we sold last year, we turned a profit. I do agree – one nice thing about owning is usually your monthly mortgage is cheaper than monthly rent. Rent is so high right now!!
Emily @ Simple Cheap Mom says
atI’ve only owned (on mortgage #3 now) but I can see us renting in the future if we want to try out new cities/stay flexible. My first two places I sold after 3.5 years and got lucky because our market kept growing and I turned a profit. But that might now happen on this house, or the next if we decide to move. Renting does offer a lot of benefits and if you’re not sure you’re where you want to be yet, I think offers a lot of extra financial benefits as well.
Sarah Brooks says
atThat’s awesome you profited twice!!! I will say, if the market dips again we will for SURE be buying. Not only would it be more affordable, but we could also (hopefully) turn another profit once the market went back up again!
Mrs. Maroon says
atWe haven’t rented since the days of an apartment before we were married. But we’ve also lived in new – less than 10 years old – so have avoided major repairs. Only one was a new roof… We live square in the prime area for hail. Tornadoes too, but have escaped those!!
Brad says
atRenting a big house is nonsense.
I apologize if I am rude.
But, do you understand rent does not come back to you?
Sarah Brooks says
atI do understand that. Currently, we couldn’t buy a house even if we wanted to because my husband is newly self-employed. As far as renting a big house, we’re only paying $200 more per month than we did in our tiny apartment. We can afford it and to us it’s worth it. This allows us to see if we want to purchase a large home or a smaller one when we go to buy.
Brad says
atBefore we bought our condo outright in 2013, we used to rent one bedroom apt.
I am glad we did.
Rent money will never come back to you.
Sarah Brooks says
atVery true! That is one huge disadvantage of renting, but owning a home is risky too because if the market were to crash you may be upside down in your loan (assuming you have one).
Kristin says
atMy own house is currently rented out back home and I am renting now that I moved. I love not being responsible for anything but a rent payment! Sometimes I think I am saving money renting by not working on home improvements, landscaping, etc. It takes the focus off the house and now I can focus on saving in other areas!
Sarah Brooks says
atI totally agree!! Even though our rent payment is higher than our mortgage, we have NO other expenses, making it super easy to budget and save!
Christina @ Embracing Simple says
atWe own our home, and while I do love being a homeowner, there is something to be said about renting being a simpler way to go. I miss our apartment days of just giving a quick call to have something fixed, but on the flip side, our apartment never truly felt like home to me either because I knew it was only going to be temporary. I have an easier time adding “homey” touches to our house knowing that we could potentially live here forever.
We were also first time home buyers back 3 years ago when the market was at its ultimate low in our area, so the financial decision was a no-brainer. Our home is already worth significantly more than we purchased it for, so it made sense for us in that way. I can certainly see how renting would be appealing though!
Ben Luthi says
atWe’re renting for now since we’re not planning to stay in Texas, but we’ll likely buy as soon as we can afford it and once we’re in an area we want to stay long-term.
Sarah Brooks says
atWhere are you planning on living long-term?! Or are you still deciding? We randomly moved to NC from AZ and it’s been awesome! I miss my family a ton, but the experience has been incredible. Plus, NC is beautiful and it’s very family-oriented. Good luck with your decision!!!
Chonce says
atWe’re currently renting and pretty content with it. For me anywhere can be home and like you I’m not really sure where I may want to live eventually. I’m no where near ready to purchase a home and be responsible for fixing things up every time something breaks or goes wrong. Having a 20% down payment is also a must for me.
Sarah Brooks says
atYes- 20% down is a must for us too! We didn’t put 20% down on our last house and we paid $150/month in mortgage insurance. No thanks!! And now, mortgage insurance stays with you for the life of the loan. I also like moving around – living in NC has been amazing and while I love it here, I can’t say I’ll feel that way 5 years. Who knows!! It’s fun exploring new places though!
DC @ Young Adult Money says
atI received the advice from a trusted mentor to buy a home earlier, if possible, because the sooner you buy the sooner you build equity. It can make sense, but it sounds like this is a non-factor for you as you are even considering buying a home. Another person I trust had mentioned that some people are really focused on cash flow and you have to factor that in when you are talking about finances. I think that definitely applies for you (again, because of your idea of possibly buying a home for cash) and I think if that’s the route you want to go you definitely should go “all in” and pay as much as possible of the mortgage up-front because you’ll clearly be happier in that situation.
Sarah Brooks says
atIf we could actually buy right now (assuming my husband didn’t work for himself), I can honestly say it would be hard not to because interest rates are so low. And you’re right – the sooner you buy the sooner you can start building equity (assuming the market doesn’t crash). It’s tough! For us, we know we’ll be renting for another 1 1/2 years minimum, which is why we have such lofty savings goals and are even considering paying cash (we’d have to wait a little longer, but depending on the market and interest rates it could be worth it!).
Tennille says
atWe own our own home. My husband bought it 2 years before we started dating and it has served us well. In our case the mortgage is actually cheaper than renting in a lot of the local apartments buildings so our home has actually been a money saver for us. In the next two years we will have to put it up on the market and move to something as our family expands one more time and our children grown.
I think its a great idea to have a plan in place and know your priorities before you decide to buy. There really is no rush, and you shouldn’t rush when making such a huge financial decision!
Sarah Brooks says
atI definitely agree that monthly mortgages are normally less than rent. In AZ, we paid $950/month for our mortgage and here we’re paying $1600 for our rental. The rental market is just insane right now. Of course, if we were to buy a house that needed a good amount of work than it’s definitely more expensive to own. I’m hoping when we go to buy the house is in good condition and we have a large down payment ready to go!
Congrats on expanding your family!! So exciting!!
Abigail @ipickuppennies says
atWe own, and while it will ultimately be rewarding, it’s definitely a huge hassle. We’re in Arizona and the utility bills… eesh!
We also didn’t buy a newer construction, so things go wrong. Last year we had to replace both toilets ($450) and upgraded insulation for energy efficiency ($3,300).
This winter, we had to replace the dishwasher and hot water heater within two weeks of each other ($700 and $800 respectively). Last month, we had to extend our masonry wall ($1500 including a new gate door). Then my husband wanted the other two gate doors to lock (before we extended the masonry wall, we had people walking into our yard) for another $700. Plus the installation of one fan in the master bathroom and replacement of one in the main bathroom ($765). Plus the $250 we just paid to have someone clean up the yard and spray pre-emergent to avoid more weeds (city keeps threatening tickets when our yard gets out of control).
Next month, we have to put in an HVAC unit for the in-laws in the guest house. I just keep reminding myself that for each thing we replace, it’s peace of mind for at least 5 years.
At some point, this will be worth it, but in the meantime I just keep waiting for the next thing to go horribly wrong.
Sarah Brooks says
atHi Abigail! What part of AZ do you live in?? That’s where we’re from – Phoenix (well, North Glendale, specifically)! Our electric bill in the summer was normally $250-$300 and our house was just under 1700 sq ft. My parents house is 3000 sq ft and they easily will pay $450 or so in the summer…and they do not keep it very cool in there!! Here in NC, I’m thinking (hoping) summers will be cheap since it doesn’t get quite as hot. Our gas bill has been a lot lately though because of the freezing winter we are having.
diane @smartmoneysimplelife says
atIf you need to be flexible, renting is definitely the way to go.
As I don’t need that flexibility now or any time soon, I like the security of owning my own place. The bank might own half (for the moment) but I don’t need to worry about getting settled and having the place sold out from underneath me.
When I was young, though, I moved roughly every 12 months. I highly recommend a yearly move for dealing with clutter! 🙂
Sarah Brooks says
atHi Diane!! Oh wow – you moved every year when you were little?! That’s a lot! But you’re right, it’s a fantastic way to eliminate clutter and not collect junk. I’m excited to own again one day (for the reasons you mentioned), but for now I’m happy renting! I’m hoping we can stay in our current rental until we buy…hoping, haha!
Neil Yadav says
atGreta blog.
Currently I am renting and would continue to do that for next 4-5 years. Just graduated with my MBA and thus back on job market only since last year. I believe the maximum one should spend on mortgage/rent of their net income shouldn’t be more than 25%. Currently am renting for $800, a great one bedroom apartment with all utilities paid and internet, which happens to be 14% of my gross pay. Secondly, a decent home in suburbs of Toronto cost between $350k to $450k. With a minimum mortgage of even $250k my payment will be above $1170 ( without taking into account my owning a house expenses like repairs and maintenance ).
Thus plan is to increase income in next 5 years, save& heavily invest till then and then buy when a market is more relaxed. I save around 52% of my gross income currently.