Two reasons not to buy a house

Published 9:13 pm Thursday, April 5, 2018

By Phillip J. Hines

Most people find reasons to buy a house, regardless if it’s a good real estate move for them. Buying a house is extremely fun for a lot of people, myself included. Shopping for homes, finding the “perfect” property — it’s just really intriguing to many Americans.

But there’s something many of those home-buying shows don’t talk about it. And it’s about reasons not to buy a house; why it’s better to rent than buy, or why it’s better to rent short-term and then purchase. It’s no fun to hear, and quite disappointing when a buyer comes to the realization that renting is just a better option than buying, but a topic that I feel is important since I want to help people in all aspects of real estate. I’ve made this mistake before, which is the only reason I feel comfortable passing on my advice to you.

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Short-term stay

If you’re in the military, in many cases, it absolutely makes sense to just rent if you’re only going to be here for three years or less. When you obtain a mortgage, the majority of your monthly payments only go to pay the interest of the mortgage, not the principal. I encourage you to look at an amortization schedule to see the drastic contrast between interest paid vs. principal paid on your mortgage in the first few years.

For example, on a 30-year mortgage with a balance of $200,000, more than 75 percent of your monthly payment just pays interest. If you’re only here for a few years, you won’t have paid much down towards the house, and the cost of selling a home averages 7 to 10 percent of the final sales price in Suffolk. You likely won’t have the equity, thus will not be able to sell the property.

Few cash reserves

This one is simple, but difficult to follow. I really recommend you have several thousand dollars in the bank dedicated to house repairs. I get it if you don’t, or if a tremendous deal in the neighborhood you want comes available. You need to jump on it. But be aware of the maintenance costs, such as termite treatment, electrical and plumbing issues, just to name a few.

While the appeal of “owning” a house makes sense financially, it really only makes sense if you’re going to be on a path to either sell the house for a profit down the road, or you have a plan to pay it off. Even then, maintenance issues will always be a concern for homeowners. Renting provides you a fixed payment each month — if the air conditioning breaks, it’s not your responsibility to fix. Having a fixed payment can allow you to focus on what’s important to you — your family, a new job, or any number of other items.

Don’t get caught up in the “stop throwing away money at rent” mindset. This type of thinking is true for some people, but in many cases, especially if you’re only planning to settle down for a few years in a particular area, it is not throwing money away.

Phillip J. Hines is a local real estate agent originally from Smithfield. Visit his website at www.PhillipJHines.com.