(Find this article and others like it at DriveWealth.com.) As you settle into your career and begin investing in your future, you will inevitably start thinking about whether or not you should buy a home. For decades, owning a home has been the ultimate symbol of success- the “American Dream.” But is owning a home the right move financially? The answer is, it depends.
The Cost of Renting and Buying
On the flip side, I understand the frustration many people feel when it comes to renting and the notion that renting is essentially “throwing money away.” When you rent a home or apartment, that money leaves your pocket and has no benefit to you, other than keeping the roof over your head. And despite the amount of money you pay in rent, you never truly have control over your home- the landlord can decide to sell the property and you may be forced to move out sooner than you would have liked. When you make your monthly mortgage payment, on the other hand, you are building equity in your home.
The Investing Potential
If building equity and working toward achieving full ownership in your home is your main focus, then buying may be a good alternative to you. One of the pluses of buying a home is that, if you manage to pay down your mortgage by the time you retire, you will have extra money to put towards travel, medical, and other expenses. In addition, you will have the financial security of owning your home outright.
When you rent as opposed to buy, you have the opportunity to invest the money you would have spent on a down payment. You can diversify your assets and invest in smaller amounts over time, rather than pouring a large sum of money into one asset class. However, just as your house can decrease in value, the market can take a turn for the worse as well. That’s why it is important to consider diversification and asset allocation when you make any investment.
Ongoing Expenses
Lifestyle Considerations
Try not to think of buying a home as an investment. Think of it as a lifestyle choice. If you are looking to set down roots in one neighborhood, have a firm career path, and have already made decisions around marriage and family, you may seriously consider buying a home. If you value flexibility in your life, or may consider a new career path in the future, renting may be the better choice.
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