When renting makes sense

Housing news has been so frequent and dramatic that I missed one interesting detail: the demand for rentals has increased. According to the Joint Center for Housing Studies, “with so much turmoil on the for sale side, many households have reconsidered their financial choices and opted to rent rather than buy.”

While homeownership is often touted as the American Dream, I agree that it is not necessarily the best choice for all Americans. Sure, owning a home can have its privileges, but there are some situations where it makes more sense to rent. Before you make a decision to purchase your own home, consider the following examples of situations where it may make sense to rent.

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 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 are 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 cannot tolerate risky investments. As we have learned, we cannot assume that home values will rise. As a renter, the risk of ownership falls with the landlord.

Your 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.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.