When renting makes sense

Homeownership has long been touted as the American Dream; yet it is not necessarily the best choice for all Americans. Despite the decline in the housing market, owning a home can have its privileges. However, there are some situations where it makes more sense to rent. Before you make a decision to purchase your own home, it is important to know that there are some situations where it may make sense to rent.

For example, it might make sense to rent if you have less-than-perfect credit. Unfortunately, not everyone qualifies for the best interest rates. Before you get locked in to a 30-year commitment, you may want to improve your standing by paying down debt and establishing a good credit history. Renting may give you the time to need to accomplish these goals.

You might be a good candidate for a rental if you do not plan to be in your residence for more than a few years. The initial cost of buying a home is steep and may only be a good investment if you have the time to pay down some of your mortgage debt. Renting, on the other hand, does not normally require you to pay realtor fees or closing costs making frequent moves less costly.

You might want to put off homeownership if you’re not prepared for all the responsibilities of owning. Caring for a home takes a lot of time, energy and money. When analyzing your situation, don’t forget to consider insurance requirements, home repair and maintenance needs, and association obligations. In contrast, maintenance costs are often included in the price of rent.

You should definitely rent if you can not tolerate risky investments. In general, home values have risen over the past few years. However, this is not necessarily the case in all areas and in all economic times. In fact, many experts are predicting that we will soon see home values that remain steady (or even fall) in some areas. As a renter, the risk of ownership falls with the landlord.

Another good reason to rent is if money management skills need improvement. A home loan is probably the largest debt that most people incur and the decision to commit to this big-ticket item should be taken seriously. Since most people’s housing costs consume 20-33 percent of their budgets, you need to be certain you can continually meet this responsibility.

Finally, you can rest assured that your homework and preparation will help to enjoy your dream home—regardless of whether you choose to rent or own.

Kim McGrigg is the former Manager of Community and Media Relations for MMI.