Can You Afford to Buy a Home In Your 20’s? You Might Be Able To Financially…But Not Socially

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Is it Wise to Purchase a Home in Your 20’s? 

More and more young professionals are buying their first homes. But is that the right step for you? Here are some things to consider.

Just as there are benefits to buying over renting, there are also some advantages to renting rather than buying. Here are some of the differences. These are some of the things you should consider carefully before buying.

Buying means staying put. When you rent, you probably won’t sign a lease longer than a year, giving you flexibility to move if you want to. But when you buy a house, you should plan on staying in it for at least three to five years, to recoup the initial costs of the purchase. If the real estate market is dropping, it could take much longer for the value of your home to recover. You may have to stay put a long time to avoid a loss when selling.

Buying means less free time. Most buyers spend more time maintaining and improving their homes than they did their rentals. There’s no landlord to call, so you’ll either have to do these kinds of things yourself, and keep track of things like when to change the heating filter or get your regular termite inspection can pose a particular challenge if you’ve never had to think about this stuff.

Don’t compare the cost of buying to renting by looking at mortgage payments versus rental prices. Buying involves additional costs, including insurance, property taxes, and maintenance and repair costs. All these can add significantly to the expense of owning.

Here are some of the benefits of buying instead of renting

You can personalize and customize your space. Your rental agreement will no longer stop you from tearing out a wall, changing the bathroom tile, or getting a pet. And of course, any improvements you make can increase the value of your property. You’re not motivated to make those improvements in a rental, where they’ll only benefit the landlord.

You get the increased value. Over time, the value of homes tends to increase (though it sometimes takes a long time, with some alarming downturns in between). When you sell, any return on your investment is yours to keep. As a renter, it belongs to the landlord.

Eventually, you won’t have a mortgage payment. One of the biggest benefits of buying is that unlike renting, where you’ll be writing a check every month forever, you can eventually pay off your mortgage entirely. Or, you’ll be able to use the equity to buy your next house, and eventually pay that one off. And if you start investing early, the date you’re done will be that much sooner.

You are allowed certain tax benefits. In addition to deducting mortgage interest and property taxes, which reduces your annual tax liability, in most cases you don’t get taxed on most of the money you make from selling your home.

Who Shouldn’t Buy

Buying isn’t for everyone, and it’s especially important to be careful about making this choice when you’re young and not sure where your life is headed. It doesn’t make much sense to buy if:

  • You plan to go back to school. Unless you’re sure you’re going to stay put and can afford the mortgage payment, or you know you can rent the house out for enough to cover its costs, now isn’t the right time to buy.
  • The size of your household may grow. It’s hard to anticipate now, but your family may grow soon. If you can’t afford to buy a home that will accommodate your new dog, new significant other, or new baby, don’t buy yet.
  • You can’t afford to buy where you want to live. Keep your mind open, but don’t buy in a neighborhood just because you can afford it. You’ll be miserable if you’re a true urban dweller stuck in suburbia, for example, and you’ll grow to resent the choice. Also, if your neighborhood is unsafe, walking the dog or taking the new baby out in a stroller may be less than relaxing. Here’s another great article on Getting a Mortgage in Your 20’s.

 

 

One thought on “Can You Afford to Buy a Home In Your 20’s? You Might Be Able To Financially…But Not Socially

  1. Richard Moore Post author

    Home ownership can seem like a daunting prospect, especially as you’re starting your career and still paying off your student loans. Think long and hard before you take out a mortgage; it’s a serious financial commitment that will follow you until you either sell the property or pay it off decades from now.

    But if you’re ready to stay in one place for a while, buying a the right home can be financially and emotionally rewarding.

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