Originally published on Military1.com.
To rent or to own…that is the question!
Whether you and your spouse are considering purchasing a home during your next PCS, or thinking of doing so once your family separates from the military, you have to admit that renting vs. buying is a tricky topic.
You’ve probably heard people say that when you rent, you’re throwing away your money because you’re not gaining the equity that comes with home ownership. Equity, or the amount that you would receive after selling your home and paying off the mortgage, is indeed a great thing to have in the long run.
How then is this not always the best plan?
For those who move around often, as most military families do, renting might be the most realistic option for your family. The initial investment is low compared to a down payment. Renting also (usually) comes with lower monthly payments. And if you’re not into home improvements and maintenance, renting allows these responsibilities to belong to someone else. Living without hassle is worth something, right?
While they aren’t always the best investment, owning your home does have a lot of advantages. Once you’ve paid off your home, it’s all yours. You’re probably thinking, “yeah, that’s obvious!” But, think about living in a place that’s paid off. No more monthly payments. All you’ll have to pay is your regular bills such as water, gas, electric, cable and internet, and HOA fees if you’re in a condo or managed community. But that dreaded regular mortgage payment is all gone!
This idea sounds simple but it’s actually pretty inconceivable to many. But once it’s paid for – there’s a real sense of freedom that comes with it, as you can well imagine. You’ll have extra money to take trips, buy that boat you’ve been dreaming of all these years, or that classic mustang your spouse has been drooling over.
On the flip side…
Home appreciation and overall value has changed dramatically since the housing bust of ’08. Also keep in mind that housing costs, and elements affecting them both directly and indirectly, are constantly changing.
What does that mean? After 2008, home prices went down, way down, and re-sale values plummeted with them. Homes aren’t liquid assets, and they can’t be divided. Homes are an all-or-nothing kind of deal. Renting is comforting in times of uncertainty because there’s an end in the foreseeable future; an out – should you need one. If you want to move across town or across the country, it’s no problem because most leases last for a single year.
Just remember, the overall housing market trends you read about and hear about on the news aren’t relevant for your individual situation. The overall point I’m trying to make here is that there is no definitive right or wrong answer. Everyone’s situation is different. Do your homework on a local level by checking out a mortgage calculator from a resource you trust. This tool is a good starting point to help you decide whether owning or renting a home will benefit you and your family’s finances most in the long run.
Another good starting point involves the topic of housing ratios. What’s the housing ratio of the home you’re looking to buy vs. a suitable rental opportunity? Look at the pros and cons – and actually write them out to start your research and help you discover what’s best for you!