Many people starting in their professional lives dream of owning their own home. They may be anxious about throwing their hard-earned money away on rent, and may not be entirely wrong. It is estimated that the average American spends $93,000 on rent by the time they are 30. If the same amount of money went towards paying off a mortgage, at least they would have a property to show for it.
However, being overly hasty to buy property may not be a terrific idea either, especially if there are student loans or shaky job security added into the equation. According to Parker Dewey, 53% of all recent graduates leave their first job within a year.
To be optimistic, in many cases leaving the first job may be in favor of a more lucrative opportunity, but in many cases, other factors such as lack of interest, too many hours for low pay, potential relocation, or a business venture not succeeding are causes for leaving a job. Having to pay a mortgage with so much uncertainty may be a reason to put off buying.
However, the real answer depends on the financial situation, what is going on in the lives of young professionals, and the property market
Pros of Buying
You Own It
The best reason to rent is that you will own the property. There is no need to feel deprived working hard to pay off the landlord mortgage. Once you own your property, you can rent it out and use it as an investment property, which, after the mortgage is paid off, can be a lucrative nest egg that keeps producing more eggs.
The Property Market Is Strong
The property market has been strong the past few years and it is a good place to invest. The National Association of Realtors reported an average 9.4% rise in home sales in the U.S. This growth occurred even though there was a pandemic going on. The rise in sales growth and prices means it may be a good time to buy before prices go higher.
Interest Rates Are Likely to Stay Low
The Fed has not been keen on raising interest rates since the financial crisis of 2008, even though many years have passed. A rise in interest rates could cause the economy to slow down, and given the recent crisis of the pandemic and its economic woes, it is a safe bet that rates will stay low for while.
Pros of Renting
Avoidance of Debt
Student loans take a heavy toll on many graduates. It may not be worth the risk to get into debt yet again with a mortgage. This problem is coupled with the shaky job security people face. Given the culture of downsizing and the gig economy, many companies don’t seem keen about keeping employees long-term, especially if they have to pay benefits. A young professional may want to wait a bit longer to ensure their jobs are secure before buying a home.
Interest Rates and Property Taxes
Even if interest rates are as low as 3%, many mortgages as for more interest. Given the large amount of a mortgage, this means a lot of money lost to interest. Also. Homeowners have property taxes to worry about. These can take a significant chunk out of your budget depending on where you live.
Freedom of Movement
People move around a lot. One major reason is job relocation or job security. If a marriage breaks up, partners need to separate. On a brighter note, you may decide to leave it all and live in Greece so you can write your novel. If you can work remotely, traveling the world while you work may seem attractive. Having to deal with a home and mortgage may be a burden as your life evolves.
The Choice is Yours
It is hard to tell whether renting or buying is a better decision. Much of it depends on the state of a young professional’s finances, job security, relationships, and how settled he or she feels in general. Weighing the pros and cons and doing due diligence before buying a home is recommended. Some may feel it was the best decision they ever made, while others may want to rent long-term. The decision depends on whatever path your life may take.
