If you’re wondering whether you’re better off financially renting or buying a home, you can easily find an app for that.
Calculators at Bankrate.com, The New York Times, Zillow and Realtor.com all let you input the relevant numbers to determine which option makes more economic sense. A 2016 analysis by GoBankingRates.com found that buying was cheaper than renting in 42 states.
But studies and numbers don’t always tell the whole story, and the cheapest option in a state isn’t always the cheapest option for an individual.
“You shouldn’t buy if it doesn’t fit your lifestyle,” says Casey Fleming, author of “The Loan Guide: How to Get the Best Possible Mortgage” and a mortgage professional in the San Francisco Bay Area. “If it’s really important to you to be going on exotic vacations … it might be better to rent.” Renting is also ideal for someone whose life is unsettled or a person who expects to relocate in a short time.
“You don’t want to buy if you don’t plan to stay put for a while,” says Liz Weston, personal finance columnist and author. “In most markets, it’s going to take three to five years to offset the cost of buying.”
In the short term, buying nearly always costs more. There’s the down payment and mortgage closing costs, plus whatever money you spend to customize the house and get it ready for you. Then factor in the regular costs of homeownership, including homeowners insurance, property taxes and repair costs, and that can add up to a big chunk of change in the first few years of owning a home.
“It’s always more expensive in the short run to own rather than rent,” Fleming says.
But if you crunch the numbers and they say buying a home is the right move, should you? Not always. Here are three good reasons not to buy a house, even if the all apps and calculators say you should.
You Don’t Want the Responsibility
If you own a home, fixing anything that breaks is your responsibility. That could be an easy and inexpensive fix, such as calling a plumber to repair a leaky toilet, or a complicated and costly repair, such as replacement of the water and sewer lines from your home to the street.
“When you buy a house, the first thing you discover is your landlord isn’t going to fix the water heater when it breaks,” Fleming says. “Are you entirely ready for the requirements?”
Not only do you need to have the money to make the repairs, you need to have the skill to find and negotiate with contractors and repair people. Tip: Start by asking your neighbors, co-workers and everyone you know for people who have done good work for them.
“It’s a lot of responsibility,” Fleming says. “I don’t think everyone should buy a house. I think there are people who are emotionally not ready for it.”
[See: The Best Apps for House Hunting.]
Your Life Plans Are in Flux
Even when buying seems cheaper than renting, you end up spending more if you sell quickly because of the costs of buying and selling. Buying a home then moving six months later to take a new job or get married can be costly.
Fleming estimates the “in and out” costs at 10 percent of the home’s value, though that varies by home and location. If appreciation is 3 percent a year, it will take you four years to break even, if you didn’t spend any significant money on improvements or repairs.
The Great Recession also was a good reminder that there is no guarantee real estate will rise in value. People who bought or refinanced homes at the peak of the market in 2006 found themselves trapped in homes that were worth less, sometimes much less, than they owed on their mortgages. If they sold, they would have had to pay the lender tens of thousands of dollars.
Houses are selling quickly now in most cities and are expected to continue gaining value in 2017, but that’s not always the case. If you invest in the stock market, you can sell your assets and have your cash in a few days. Real estate has a much longer time frame.
“I’ve actually talked people out of buying a house,” Fleming says. “It’s very illiquid.”
People whose lives are uncertain may not want to buy. Owning a home could make it harder to relocate for a better job, engage in long-term travel, care for aging parents out of state or unite with long-distance lover. Think hard about your current lifestyle and how it may evolve in the near future before you sign on the dotted line.
You Won’t Have Any Savings After You Buy
People often forget that the down payment and closing costs are just the beginning when you buy a house or condo. Even homes in solid condition need maintenance and repair, from painting to new roofs to new appliances.
Every homeowner has a story, often multiple stories, of air conditioners and furnaces that needed replacing six months after they moved in, burst pipes that flooded the basement and washers that stopped forever in midcycle. Annual home maintenance and repairs easily can run 1 to 4 percent of the cost of the home, according to several real estate websites and Freddie Mac.
“Houses are expensive and things break,” Weston says. “You need to have a healthy emergency fund and be able to add to it.”
Some lenders require homeowners to have savings as a condition of approving their mortgages. Even if your lender doesn’t, you don’t want to spend your last cent buying a home, especially if you’ll be stretching to pay the mortgage, taxes and homeowners insurance.
“You don’t want to come out of the process of buying without at least three months of savings,” Weston says.