October 10th, 2009Reasons Not To Buy A Home
Talk to a mortage lender or bank, or pick up the real estate section of any newspaper, and the opinions are always the same. The best time to buy is NOW, they say. No matter what your persoanl situation is, no matter where you live, no matter what the current interest rates or prices are, it’s always, NOW, NOW, NOW. In reality, there are plenty of great reasons NOT to buy a home, and to continue renting. Beth Kobliner lists several great reasons in her New York Times bestselling book Get a Financial Life – Personal Finance in your Twenties and Thirties.
Among the reasons,
- “If you can’t envision yourself in the same place for the next several years, you should rent.” – There are thousands of dollars in closing fees for both buying and selling a home that can seriously impact your ability to make a profit or even break even.
- “If you have an amazing deal on a rental, it might make more sense to rent and stash your savings elsewhere.” Rental markets are softening around the country and there are numerous mainstream and local blogs raving about negotiating lower rents. Consider MAS’s take on the Seattle market in Updating the Moving Scorecard – and his successful attempt to negotiate a rental rate increase into a rental decrease.
- “If you don’t have steady income, keep renting.”
- “Don’t assume you always get a tax break for buying.” The federal government does allow homeowners to subtract their interest payments and property taxes from their taxable income, but doing so also takes away the FREE STANDARD DEDUCTION. If your yearly interest payments are below your standard deduction, there is no tax benefit to owning a home. Even if you have an advantage in the early years, that advantage will go away as the balance of principal vs interest payments changes over the course of the loan.
If you are going to rent, there are also tips listed in her book on what every renter needs to know:
- “Try to negotiate the rent.”
- “Negotiate the terms of your lease”
- “Negotiate with the real estate broker if you’re dealing with one.”
- “List all your roommates on the lease, and have them all sign it.”
- “Get everything in writing.”
- “Understand how a security deposit works.”
- “If you plan to renew your lease, contact your landlord two months before the lease is up and try to negotiate.”
- “Know your rights.”
Other interesting topics in the same book are:
- Dealing with debt
- 401k’s and investing
- Insurance – what you need and what you don’t
- Paying less taxes
- Military benefits
To find out more, click to buy the book below.
Get a Financial Life: Personal Finance In Your Twenties and Thirties by Beth Kobliner
October 15th, 2009 at 5:21 pm
Nice post.
Your point about the breakeven: One should compare ‘free tax deduction’ to ‘interest’ + ‘property tax’
Other items such as incremental ownership costs to things such as utilities (heating, electric, water, trash), repairs, and continual maintenance also make owning more expensive and time consuming.