rented life:
When do you know it’s the right time to buy a house instead of renting? Is it better to rent until you have a sizable downpayment? (Let’s assume the plan is to stay in area so buying to have to sell right away isn’t likely.)
There are some good generally agreed upon heuristics for when not to buy.
#1. (As you point out in your question…) Don’t buy unless you’re planning on sticking in the same place for at least 5 years. Housing markets bounce up and down, with a general upward slope overall, and you’re less likely to be underwater if you hold onto the house for a while (note: this is the same heuristic as the one for investing in the stock market!). Being underwater when you’re living in a house isn’t a big deal (and may mean your property tax drops), but it’s a huge hassle and can be very expensive when you’re trying to sell. (If you’re willing and able to take the loss of the price of the house, this rule can be relaxed– if houses are under 100K and you have much more than that in savings and a large income, you’ll probably be ok even if you only stick around a couple years and take a loss.)
#2. Don’t buy unless you have at least 20% down (and no other major consumer debt). Being able to save that 20% means you have discipline, that you are used to living on less than your earnings, that you are more likely to be able to handle a regular monthly payment that you cannot miss. It also means that you avoid expensive mortgage insurance and you aren’t doing risky double mortgages in order to avoid said insurance. Finally, it gives you more breathing room so if you do have to move and the housing market shrinks or you need to unload the house quickly, you’ll have that flexibility.
#3. There are a lot of other heuristics about how much of your income etc. to spend. That’s more about *what* to buy rather than *when* to buy, so I’ll leave a nice link to No Trust Fund on the topic here. But obviously if there are no housing units in your area in your price range but there are rentals, renting is what you should be doing rather than violating #1 and #2. (You will still want to think hard about putting down 20% on a million dollar house if you aren’t sure you’ll always be able to make the monthly payments. Maybe waiting until you have 40% will provide more peace of mind.)
Ok, so that’s when not to buy… how about when to buy? When is buying better than renting?
Luckily there’s a calculator for everything on the internet, and this calculator from the NYTimes is teh awesome. It will tell you which is a better deal in your circumstances, renting or buying. (Think of mortgage interest as equivalent to rent– if the mortgage interest is greater than rent for the same house, you’re losing money by owning and would be better off with that down payment in the stock market or other investments. Well, mortgage interest and property taxes and HOA/Condo fees and upkeep. Even with a paid off house there’s still annual expenses.)
However, there are also intangibles to home ownership. Some people want to paint their own walls. Some people hate having to deal with maintenance. And so on. These intangibles will tip people one way or the other even if the money doesn’t work out that direction. Note that if you decide to become a permanent renter, you need to increase your retirement savings to make up for future housing costs and the lack of forced savings that is the mortgage principal.
Note that the when *not* to buy is there to guard you against really heavy negative shocks. It’s about how to guard yourself from what can be a pretty bad risk. The when *to* buy is less about risk and more about getting a better deal. So if the intangibles are important to you, then you can put a price on them and even if the rent vs. buy calculator comes out against you, so long as you can safely handle the payments etc. you can still buy and be better off. But you should still follow the when not to buy heuristics in order to stay safe– if the intangibles are important, then you need to save more money.
So readers, when did you know it was time to buy or to keep renting? How do you make these decisions?
Grumpy Rumblings (of the formerly untenured) 
October 19, 2012 at 7:49 am
I honestly can’t imagine a time when I’ll be a homeowner. I feel sort of ambiguous about that.
October 19, 2012 at 7:51 am
Florida’s housing market is so crazy with the ups and downs, it makes sense to feel ambiguous even if you have a downpayment and are planning to stay 5+ years. One day your house is worth 400K, the next it’s 90K… then back up again.
October 19, 2012 at 8:25 am
Buy a house when you decide that you do not have enough niggling details on your to-do list to keep you busy. ;) Idle hands and all that. Speaking of which, I should probably go fix that fence now.
I could go back to renting, but I would find it rather difficult to go back to living in an apartment. I don’t like hearing my neighbors fight…or their little brat bounce a ball off the wall between our apartments.
On the other hand, it makes me happy to own fruit trees/bushes.
October 19, 2012 at 9:16 am
I don’t mind the to-do list–I enjoyed that aspect of it a lot actually (we owned for 7 years, then moved and sold and now rent).
It is INSANELY difficult to rent again. When people park illegally, blocking you in and the leasing office does nothing. When people smoke and they’re not supposed to (again useless leasing office…little letters obviously aren’t enough to ENFORCE your lease). I miss gardening, I miss NOT being woken up by the upstairs neighbor several times a night. The daily annoyances for me are outweighing the once you buy there’s a never ending to-do list.
October 19, 2012 at 9:24 am
Can you rent a house instead of an apartment in your area? It sounds like you’d have the same unpleasantness if you bought a condo and it’s the free-standingness you’re missing, not the mortgage! Maybe even a trailer/portable depending on what the market for those is like where you are. (Here middle class folk will rent/buy a huge chunk of land and live in a trailer/mobile home/pre-fab in the middle of it while they save up for a house or spend all their extra money on their horses.)
October 19, 2012 at 2:09 pm
House rentals start at $1400, higher than a mortgage for the same size house. No utilities included. Wish I was joking.
October 19, 2012 at 2:18 pm
Our rent for a cruddy apartment in grad school was $1200 for that 100 sq ft efficiency, and $1800 for the two bedroom with the dangerous radiator, peeling paint, etc. that we ended up in our last year (but it was in a nice neighborhood!) Not including utilities. So we bought a really big house here with the same monthly mortgage payment. (Something we probably would not have done had we gone to graduate school someplace with lower costs.)
October 19, 2012 at 2:21 pm
I should have added that that rental price is about $300 more than mortgage (even included taxes, etc) for the same size place. Given that the only locations for renting a house are also fairly nice neighborhoods, I’m beginning to think these are people underwater in the mortgage and trying to make it up.
October 19, 2012 at 3:21 pm
Could be, but in our neighborhood it’s always been like that– there isn’t much of a rental market for nice houses that students can’t live in, but there’s a demand for them, so the prices are higher, even though rental prices in the town in general are lower.
October 19, 2012 at 8:35 am
The financial advice we followed circa 2008 is not the conventional wisdom, but bizarrely, it has served us well: “Buy the largest house for your family size that you can reasonably afford. Include the possibility of a parent or child eventually moving in with you. Live in it forever. Never buy a second home.” Sounds crazy I know.
October 19, 2012 at 8:43 am
That’s pretty much what we did … though partly it was we were sick of moving and partly it was that housing was so cheap compared to our rent in the graduate school city. The previous owners sold the house, we think, when their parent either had to be moved to a nursing home or died– the MIL suite (our guest bedroom suite) is handicap accessible.
October 19, 2012 at 9:17 am
That’s really interesting advice. Our first home was small, but now compared to renting, I’d go back to the small house in a heartbeat. Husband has been of the mind “well we can always move in X years if we want, we don’t need to die in that house.” But I hate moving.
October 19, 2012 at 9:38 am
That calculator is loads of fun. I keep entering different prices/taxes of the different parts of the city that we have considered living in. One mortgage person I talked to said she doesn’t do the double mortgages. (I really liked her–she explained the numbers very well.) The other mortgage guy REFUSED to talk to ME but said that my husband could call him back. Like a “don’t worry your pretty little head honey.” Too bad you can’t buy without dealing with idiots.
At the moment our situation is this–renting this year isn’t a big deal other than we both hate it. But this place is so super tiny that staying in this particular apartment and having kids (another goal) is impossible unless we (as my mom suggested) get rid of books. I can’t fathom paying for storage for things we own when it’s the same cost to rent a bigger place. I really can’t fathom getting rid of books (unless we don’t wait said books). We have downsized a great deal–no couch, no spare bed, no desk, the dinning room table can’t even be used–after taking out both leaves, that’s how small this place is. (It was available for our move-in date and allowed cats, in case you’re all wondering what the hell we were thinking.) We know we’re not moving out of the city, and we’ve been researching different areas in terms of taxes, schools, how close they are to other convienences we like, etc. Moving into a slightly larger apartment is something we would consider doing for a couple years in order to save up the 20%, except that renting is more expensive than owning here. Renting 1100 sq ft is the same as a mortgage payment for a 1300-1600 sq ft house (that would have yard, basement and no loser tenants.) I don’t want the decision to be totally emotional, nor totally financial because I’m really good at not doing anything at all when it’s financially based. The #1 on not buying is a non-issue, it’s just sorting out the rest. I plan on having husband read this so we can keep talking. We don’t need to decide this tomorrow, but I want to make a smart decision.
The good news? Our credit score is phenonmenal so when ever we do this I already know we’ll get a very good interest rate, from talking to different mortgage people.
October 19, 2012 at 9:43 am
Sounds like you should be saving up your 20%!
We lived in a 100 sq foot apartment in the city for 3 months… when we got an option for a 300 sq ft subsidized university apartment at the same price we broke our lease, paid the penalty (they filled up the apartment in under a month, so we didn’t even have to pay the full penalty), and luxuriated in the increase in size.
October 19, 2012 at 10:06 am
We don’t mind renting … have both been doing it all our adult lives. :-) We have lived in older buildings, in which the owners/managers have been thrilled to let us upgrade light fixtures, paint colors, faucets, flooring, cabinet hardware etc. to suit ourselves. We’ve been in our current place nearly nine years. It’s bigger than the houses most of our friends own; we pay a lot less when you factor in maintenance, taxes, and insurance; and our commutes are negligible.
For us, the choice between renting & buying was no choice at all. We want to live in West Los Angeles, because that’s where we work. Throughout metro L.A., rents are fairly equivalent – we couldn’t necessarily find a 2 BR, 2BA apartment for less anywhere in the city (especially not one as big as ours), so why not live central.
Home prices on the other hand are nowhere near equivalent. The square footage we rent for $2400/mo would cost nearly $6000/mo in mortgage payments (not kidding) in our neighborhood or comparable areas. Right now, either of us could cover our rent. With a mortgage on a million-dollar house (and there aren’t any other kinds in West L.A. that a rational person would want to buy) we would have NO disposable income, and considerable work-related anxiety, i.e. “we can’t afford to lose a job (me) or take a day off (DH).”
A house of the same size might cost as “little” as half a million elsewhere, but there is a really, really big range of neighborhoods in this city and most of them we wouldn’t want to be committed to via a home purchase.
Long story short: We don’t want to retire here, so we’re not buying here.
October 19, 2012 at 10:11 am
That’s how we feel about most of the cities we would want to live in, re housing. Fortunately(?) our jobs are in areas with much cheaper housing costs. Though #2 is renting because she didn’t know what her life situation was going to look like (or if she’d be able to live with her partner).
October 19, 2012 at 10:39 am
Buying vs. renting for me was more of a lifestyle decision than a financial decision. I wanted a yard so I could garden, plus I was tired of having people above me/below me/next to me and all that meant in terms of noise and property management issues. For folks like me who want the freedom to paint walls and do stuff in the house/yard without having to get special permission, it is possible to buy a smallish house and keep maintenance costs under control that way. I don’t enjoy or have the skills to fix stuff myself, but I do have a budget for house maintenance so I can pay a handyman to do those things. My house is larger than I need, so if I could do something different I would have bought a smaller house.
October 19, 2012 at 11:43 am
We are renting and that NYT calculator says we should keep renting for the next 12 years…
Which is perfect because we really are planning on renting for at least the next three and then possibly relocating back to the SE so we can buy and feel like kings of the castle in a house for 1/3 of the price. There is something very, very disconcerting (to me) about paying a million dollars for a house that doesn’t, like, have an elevator in it.
October 19, 2012 at 11:57 am
It’s crazy how what we’ll accept in a house is so different here where houses are cheap compared to the coastal cities. Our (relatively new) house was in tip top shape here when we bought and is gorgeous … but the last place we lived on a coast (a 1950s bungalow) we were even happier with but the floor was uneven, there were places ants came in on a regular basis, the kitchen was ancient, etc. etc. etc.
October 19, 2012 at 11:45 am
We violated your #2 and bought at 10% down, 10% second mortgage. In our case, I think it made a lot of sense for us.
We moved from BigCity to SmallCity, with a drop in living expenses with a large increase in salaries for both partners, one of which was a TT position, so a 6 year guarantee of stable income assuming competence at the job. We rented for one year, lived cheaply, and saved up a full 10% down payment in that year. We wanted “our space” with time to enjoy it before tenure time came, with all its uncertainties.
We bought our house on a 90/10/10, paid off the second 10% in two years, and then wrapped 75% of the 2nd mortage payment into our first to continue to pay it off quickly to make sure we would not be underwater at tenure decision time, even if house value dropped significantly. However, we kept a longer term mortgage to maintain the flexibility to lower payments if our economic situation changed.
Intangibles: our neighborhood provides a lot of our social life; we could not get that type of stability in a rental situation. When I make changes to the house, I don’t have to think about whether the owner will like it – it is my house. I can buy furniture for a place in the house, rather than in generic “should look good anywhere” style. And we were both very tired of moving, having been going apartment to apartment and city to city on the educational track for over a decade.
October 19, 2012 at 11:53 am
The concern with violating #2 is that it opens you up to risk. Yes, in general the majority of people won’t get into trouble doing it, but you are much more likely to get into trouble if you don’t have that 20% down. If housing prices go up, you won’t get into trouble, but if housing prices drop and you lose your job, then you’re in huge amounts of trouble. Much more than if you’d put more into your house or waited to buy until you could put more in.
So yes, lots of people do very risky things and turn out ok, but they’re lucky.
October 19, 2012 at 9:31 pm
I’m about to quibble with your risk assessment =) Please tell me where I fail!
If I have the typical readership of the blog pegged correctly (which it is possible I do not), it tends towards the early career academic, often tenure track. Early TT academics have a hedge against risk which the average person does not – you are unlikely to lose your job against your will prior to going up for tenure, and 3rd/4th year review gives you a good sign as to what will happen at the end of year 5-7. Several years ago, one of the other academic-style bloggers (I thought Chronicle’s Pennywise, but could not find it just now to link back) referred to this as equivalent to a bond with the value of (your salary + benefits) * (tenure clock length). This provides a floor on your income, although the downside is the massive uncertainty at the end of the tenure clock period.
At that point, you still have the risk of housing prices dropping, but you minimize the risk of losing your job unexpectedly. In 5 years on an 80/10/10, even if you pay only minimum payments (which no one reading this blog is likely to do), you will have 20% down. Even in the worst housing bubble in decades, the home price drop from peak was near or under 30% outside the major metropolitan areas of the four worst states for real estate (see for example http://www.housingviews.com/2012/09/27/comparing-the-cities-3/book2/ ); unless you both bought at the peak and are unlucky in location, at the end of those 5 years you were above water. If you did make extra payments or take a 15-year (which goes along with buying under your means), you would be above water even in an extremely poor location.
I would also argue that for most academics it would be unwise to buy a house halfway through the tenure clock, due to the risk of having to move at the end. So for many, the choice is to buy early with a lower down payment, or rent until time runs out and lose out on many years of home ownership, which is a different type of risk.
October 19, 2012 at 9:54 pm
Just because you can’t be fired for 5 years doesn’t mean you won’t want to leave before then and we know full well here that passing your third year review does not guarantee tenure (nor do you necessarily want to stay even if it does). (Note that one can also fail a third year review.)
Yes, not being able to be fired does provide additional stability, but if you’re in an area with no non-academic options and your job is unbearable, you don’t want having a house to force you to stay there.
No, the majority of our readers are not academics (as far as we can tell).
And yes, we did buy here at the beginning of our stay, but we also had 20% down. Most of our colleagues are waiting a year or two before buying, for one to make sure this is the job they want, but also to get a feel for the town (we bought on a 3 day visit) and to build up that safety net. And, as we said before, housing prices are pretty cheap here so the most we could be out of pocket or in debt is limited.
October 21, 2012 at 1:38 pm
As the original questioner, I’m not an early TT academic at all. I mean if only TT academic are reading n&m or buying homes then…well they have a very small audience. And as N&M pointed out, being TT doesn’t mean much in terms of job secuirty. Colleges/unis change their minds, bad fits happen (I just moved away from one), etc. I think saying a TT person has a hedge against risks that most don’t is a little short sighted. My husband’s job, despite being “at will” is far more secure than any academic job I have had.
Over a year ago I moved for what was supposed to be a TT position. (They lied, that’s another story of bait and switch.) The TENURED faculty were all floored that we didn’t buy a house, but I’m thankful we didn’t. For one the salary wouldn’t cover housing in one of the most expensive cities in the US, second of all, I hated living there.
Lastly, we bought our first home on an 80/20, and ONLY made minimum payments, so there are people who are likely to read this blog and make minimum payments, and were lucky as hell to sell because 1) the neighborhood was changing and 2) we had to sell fast to move for work. We weren’t underwater, but it wasn’t necessarily a financial boon either, just a lifestyle one. We sold without loss but not much gain. (Had we waited another year, we wouldn’t have made a gain at all, we learned.)
October 19, 2012 at 1:18 pm
I supposedly did everything wrong (except one thing), but it all turned out right (except that one thing):
* I did not have a 20% down payment. I had $5,000 for a $61,500 mortgage, but it turned out only about $60 of that went toward the down payment and the rest was all closing costs. When I refinanced, I STILL did not have 20%, but I was a lot closer, so my mortgage insurance premium was greatly reduced.
* My house cost more than three times my salary (which was still below 20K at the time). But I was planning on having a paying roommate most of the time, and I did. And it cost just over half the median price of a house in my area, so I don’t see how that could have gotten any better. Still, …
* My payment alone was the same as or more than renting. My payment was a little over $600/month for a 2/1. I had been renting a 1/1 for $300 and could have gotten a 2/1 for $400. Plus the repairs and the buying appliances made it cost more, but only while I was paying off the loan. Now that the loan is paid off, of course it’s cheaper to own.
* My inspection report was a checklist, and I later learned that an inspection should not just be a checklist. However, it turned out okay.
* I did expect to own the house indefinitely, though I expected to end up with a guy who wouldn’t want to live in my little place, so we’d move to his big place and I’d rent mine out to students. Turns out my guy is no richer than me. And turns out I don’t want to live in any of the places my (richer) friends live–I prefer my central location.
* The one thing I did right was invest my extra money in the stock market instead of prepaying my piddly 6.625% loan. Right during the period when the market stagnated. Oops.
It would have been very difficult to save 20% of an ever expanding housing cost–I feel I did much better to lock in my lower price (even though property didn’t bubble where I live). The house is now worth four times my current income. So I’m glad I didn’t wait. And I’m really glad I didn’t wait for some prince charming.
Oh, it all started when I answered an add from a real estate agent who said you could buy for the same price as renting. She was wrong, but not as wrong as I thought–you could get a two-bedroom condo for about the same cost as renting a two-bedroom condo. However, I decided I didn’t like condo fees. She said, “Would you like to see houses in your price range?” I said, “No, I don’t!” I reconsidered and said, “There are houses in my price range?” Most of them were too run down or too far from campus, but the ones in my neighborhood were good. I was about to settle for a 600-square-foot place when I found my 960-square foot place, which turns out to be an infinitely better choice for my current situation (and cost only $1,500 more to buy.)
So, I can hardly recommend this approach for everyone. Or anyone. But I’m also afraid to recommend waiting until you have a big enough down payment and a big enough salary and you know who your spouse is going to be, because I would not have a paid-off house in my favorite city to live in now if I had done that.
October 19, 2012 at 1:22 pm
Doh, I meant I could have gotten a 2/1 apartment for $600. But the apartment comes with repairs that cost begging instead of money.
October 19, 2012 at 6:57 pm
It’s all about risk. Sometimes you get lucky when you take a risk, sometimes you get unlucky. When you don’t take risk, you often pay more for the privilege, but in general, the extra that you pay is less pain than the pain you would feel in the bad situation. The heuristics help manage that risk to standard levels. If you were to take no risk, you wouldn’t ever buy a house unless you had enough money on hand to completely pay for it plus a cushion. (Even if you take out a mortgage.) The heuristics moderate that. 20% down, staying for 5 years, etc. There’s still risk, but at levels that are manageable much more of the time.
We did buy without knowing we were going to stay here 5+ years, but the cost of houses was so low, we figured we could chance it– at most we would be out 265K, but most likely not even that. (For some reason 265K seemed insignificant compared to our shiny new grown-up salaries before we had kids and all the expenses that come with them.)
October 22, 2012 at 10:24 am
Thanks for emphasizing risk. Too many people don’t look at housing choices as risky, even now. … I am not a gambler and the biggest thing I want to take a chance on is a used car. Mine was $6000 at thirteen years old and still runs great. The same gamble on a half-million-dollar house? No thanks.
October 19, 2012 at 1:39 pm
I think there should be some additional considerations for #1, and it comes from watching grad students buy houses. If you know you’re going to move, even if you’re going to stay at 1 location for 5+ years, don’t buy if you can’t afford (either in time or money) to NOT have the house sell when you’re ready to move.
Seen a lot of grad students buy a house, then not be able to sell it when they’re ready to move. And since they either need the money to move, or don’t have time to rent the place, they’re in a very bad situation. Some housing markets houses sell quickly, if priced right, but here (even before the recession) it takes several months for a house to sell, and then you have to deal with the time it takes to close.
October 19, 2012 at 2:23 pm
Yes, having a cash cushion in case the house doesn’t sell is always important. The 5 year rule generally means that you’ll be able to sell the house at equal to or less than its market value and still be ok, but it doesn’t always work. A good point about local market conditions.
October 19, 2012 at 1:51 pm
All good advice. I like that you cover the pros and cons without much bias, as I usually see in posts/articles. My personal peeve is when people sell and if they sell for a higher amount, they never factor in taxes, interest, PMI, upgrades, etc.. I’m not saying they didn’t profit but it’s not often as high as they assumed.
I think for us renting a house is a good compromise. We don’t share walls and we’ve actually painted the walls. Our landlord is very good and we’ve been lucky to have lower rent than average. I definitely would find it hard to rent an apartment and share walls again!
October 19, 2012 at 6:49 pm
Yes, I don’t think we can go back to an apartment either. Especially with kids! Kids make noise.
October 19, 2012 at 2:22 pm
The painting the walls must depend on where you live. Where we live now and the city we used to live in, it was assumed you would paint. But when we lived in another state it was a big no-no.
October 19, 2012 at 6:00 pm
Oh, you guys are in my head! I’m getting ready to buy. I have 12% + closing costs saved, and after crunching the numbers I’m going to borrow the other 8% down from my parents, and repay them over 15 years at 2.5% or so interest. I got a quote for the mortgage with 10% down and the PMI was $64/month. With a higher down payment giving me a lower P&I amount, and paying my parents about 100/mo, I’ll be ahead a whopping $41 per month. Not really significant, and hard to feel like it’s that important to have a full 20% to apply to the down payment. BUT it does give me a little more flexibility, it does save me 15k over the course of the mortgage (I calculated that I would have been done with PMI after 6.5 years of payments but of course that assumes that values didn’t change wildly).
My mortgage will be less than 2x my salary, but the taxes and HOAs are not insignificant. I’d like to know how to add fees up to figure out how much of a mortgage loan they represent – does that make sense? How do I compare a 100k condo with 200/mo fees to a 150k house? Is it about the same, really?
Anyway I’ve decided a house and its upkeep is not my bag. After nearly 20 years of renting I’ve never had bad neighbors, never wanted to paint, and never craved a lawn to mow, so I think a condo is a good call. I’m visiting my prospective home tomorrow – we’ll see how it goes!
October 19, 2012 at 6:40 pm
That’s a good question. You will have those fees for the rest of your ownership of the house and they will go up. Just like property taxes!
But, just like property taxes, those HOA fees are *supposed* to be buying you goods and services that you would otherwise have to pay yourself. So it is *supposed* to be a wash on average. You pay money in and get maintenance out (or in the case of property taxes, schooling out). So, if you value the HOA fees at their average, then the 100K condo should be a better deal than the 150K house. If you don’t value what they provide, then the 150K house may or may not be better.
It’s like, if you’re an older person you buy a house in a terrible school district and vote against increasing taxes for the school, but if you’re a young person with kids, you get a place in a good district and pay more for the privilege.
October 20, 2012 at 7:55 am
The question of why and how I decided to buy really made me think. It’s hard to remember! I’m not sure I had a great reason. I was sick of renting and depending on landlords to fix things, like, say, very leaky roofs. I also had a large savings account just sitting there, it was enough for 20% down plus a big emergency fund and no debt. And I think my mother may have given me some “great” advice like, instead of letting that money rot in the bank earning nothing, you should invest in a house. Ha ha ha! And I followed it. This was at the top of the bubble. I also thought, hey I have plenty of free time and wouldn’t mind some house projects (another amusingly naive thought. now I’d kill for that free time back).
But, at least I was smart enough to buy less than I could afford, and way less than the lenders said they would give me. Everyone tried to get me to up my budget, lenders, the real estate agent, my parents. Ignore them. Still my house was still more than 2 times my salary, more than 3 times even. It worked out though, I’ve been here seven years and have been prepaying my mortgage for the last three.
For years I said that when I sold this house I’d never buy another, but I’m not sure I would be able to take renting again, though no longer having to be/hire a handyman would rock (thank god my boyfriend is handy and doesn’t mind fixing crap.)
October 20, 2012 at 2:20 pm
I originally didn’t see buying a condo as an option, so I thought that buying a place was super far away in the future since I wasn’t interested in a house. After I bought my car, I kept stockpiling cash anyways, in a savings account labelled “Down Payment Savings” instead of “Vehicle Savings”. I started maxing out my 401(k), which reduced the monthly cash stockpile somewhat, but it was still pretty healthy. I’m really glad I just started stockpiling the cash for a down payment even though I didn’t plan on buying anytime soon because sure enough, I ended up doing just that!
I had dated someone who owned a house, which cemented the fact that I didn’t want to live in a house anytime soon, but the idea of owning the thing was kind of cool. One of the reasons for our break-up was that we simply wanted different things in life, e.g. city and state to live in. Despite owning a house, he wasn’t really confident that he wanted to stay in our city for any definite period of time, but I realized then that I really did want to stay here for awhile.
So at this point, I realized that I could afford a $250,000 place with 20% down and the monthly carrying cost would be comparable to renting. I have to admit that when I pulled the trigger last fall, I was on the cusp of it making financial sense, but by the time it really happened in June, it definitely made sense. So in hindsight, I think I probably should have signed another year-long lease last fall/winter and started looking this fall/winter, but it’s all done now.
I’m really glad I didn’t buy a house or a townhouse. I just couldn’t see myself living there in the next several years. I am, however, glad I bought a two bedroom condo since it has room to grow. I’m glad that I don’t have to deal with a rental management company anymore or rent going up 10-20+% per year. I’m also really glad for the extra space (but I could have gotten that in a two bedroom rental). I’m glad that when the fridge breaks, I’m the one (and maybe a partner) who gets to choose what kind of fridge it will be replaced with. This whole owning thing is definitely weird though, being responsible for the maintenance of all this space until I sell.
In a way, I think that for my personality, owning is a better it and less stressful than renting. I guess we’ll see if it made sense in a few more years, but at the very least, I’m reasonably confident I won’t be stuck in this place (re: unable to sell) since I put 20% down and am paying down the mortgage so aggressively.
October 20, 2012 at 5:50 pm
Housing here is totally unaffordable. We may want to live abroad. T isn’t sure what he wants to do for a career.
That said, I can’t wait till buying a house is within reach. I’m sick of shitty damp, falling apart crazy expensive rentals and flatmates.
October 22, 2012 at 12:26 am
[…] Nicole from Nicole and Maggie: Grumpy Rumblings Ask the grumpies: when to buy vs. rent. […]
October 26, 2012 at 11:22 pm
I bought because I could not find anything tolerable to rent, and what I could find, involved paying noticeably more in rent than I would on a mortgage. Owning vs. renting, well, cost really is about the same since when you own, you have maintenance, and when this thing is paid off it will need major maintenance and improvements, for me if I stay or to make it marketable. Generally speaking I would prefer to rent due to the time maintenance takes, but I would have to live somewhere where they had rentals I liked.
October 26, 2012 at 11:25 pm
P.S. OK, I should have a condo, really. Again, if they had ones here I liked. When I retire or do something else, I will have a condo in San Francisco, Houston, Mexico City, or somewhere similar.