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How To Know Which You Should Do

Most of us agree that home ownership is the best opportunity to build wealth for most Americans. But there are situations when renting makes more sense.

“When you pay rent, you are paying someone else’s mortgage,” says Brian Rugg, Chief Credit Officer at loanDepot, the Lake Forest, California-based nonbank holding company which sells mortgage and non-mortgage lending products. “But that does not necessarily mean that buying is always the best choice for everyone in every situation. The wise choice of whether to rent or buy really boils down to an individual’s life and to the parameters of their situation.”

While home ownership is the better long-term investment, Rugg points out that renting brings with it a degree of flexibility that a home owner does not have.

“Even if you still have months to go on your lease, usually you can sub-let for the remainder of time. So, if you believe you might move in a year, or if you don’t know whether you want to settle down in the area you live in, renting is the better option.”

It is also a good choice for people allergic to home maintenance chores and expenses.

“You may not be building wealth each time you make the monthly rent payment, but you have no maintenance worries, either. You simply don’t have to think about it, and that can be a nice way to live.”

Rugg explains that the way home ownership ties people down its more complex that they may anticipate.

“They’ve watched a lot of home renovation shows, and they think that they can always flip the house. In reality, it takes time to sell a house, and there is no guarantee of a quick profit.”

Another common misconception is that, if homeowners need to move, they can easily rent out their house. Being a landlord at a distance is expensive and time-consuming, Brian Rugg explains.

“You have to hire professionals for anything that needs to be done, since you are not there to do it yourself. That gets very costly. And, being a landlord is difficult enough when you are close by, and able to build a relationship with tenants. And remember, when people rent a house, they often do not treat it with the care they would if they owned it.”

While renting is a better option for young people who are apt to make geographic or career changes, he does advocate for home ownership.

“If you are in a stable situation and are able to buy a home, you should.”

Although interest rates have risen, he points out that, compared to historic rates, they are still very low.

“There’s a lot of concern about low inventory and high demand, but that is nothing new. And the market is stable: we are not about to enter another situation like in 2007. So, if you’re in it for the long haul, buy.”

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