Why I Rent
As someone who lives in NYC, even the thought of trying to buy seems unattainable. With housing prices beyond reach, I have come to realize I might be a renter for life. While it has been engrained in us that renting is throwing away money, I’ve started to realize that it might not be as bad as people make it out to be. Over the past few years, the conversation has been changing to understand the whole picture of what it looks like to rent vs. buy a home. Below are the reasons why I choose to continue renting.
Currently, interest rates are high - the cost of getting a mortgage to buy a home right now is expensive. Because mortgages are based on compounded interest, by the time you pay off your mortgage, you will have spent a large amount the interest along with the cost of the home.
Upgrades / repairs are expensive - every time something goes wrong in your home, YOU have to fix it or pay someone else to fix it. As a renter, I have the luxury of calling up my landlord and telling them THEY have to fix it. Over the years, repairs / upgrades can add up.
Thinking of equity differently - everyone says that once you own a home, you have more equity which makes you wealthier. It’s true to some extent, but a home is a need (everyone needs a place to live). The moment you sell your home, you don’t just get that money as you have to use the money to buy another home to live or rent. Granted, if the home you purchase is cheaper than the cost of your previous home + home investments since you bought it, you will make money. Realistically, most people do not downgrade, but upgrade, meaning they need all the money from their previous home sale for their new home so no money was actually made.
Don’t forget about home insurance + taxes - these are yearly expenses that never go away. Taxes are based on where you live and home insurance has been increasing due to the increase in natural disasters from climate change.
I’m single - most people who buy (although not everyone) have two incomes. This helps with the a) down payment and b) monthly mortgage payments. As a single person, saving the recommended 20% for a down payment is much harder to do along with covering the entire monthly mortgage.
The New York Times just came out with a rent vs. buy calculator. I’ve been playing around with it and every time it tells me I should continue renting. It has many different inputs you can manipulate. You can check it out here.
I also read an interesting article from The New York Times about how starter homes have become too expensive and unattainable for many. You can read the article here.
It’s not always a bad thing to buy a home. Our next post will be from my business partner on why it can be a good investment to buy a home.
- D