Personal finance is personal, sure. But the real personal decision that can have a substantial effect on your money is whether or not homeownership is the right move for you.
Owning a home has always been a dream of mine ever since I was a little girl. Back then, though, I wasn’t aware of all the expenses and expectations that correlated with homeownership. To me, nothing but the paint colour really mattered. It had to be hot pink. A genuine first-time buyer essential if you ask me.
Now, I’m a little bit more aware of the realities that are owning your first home. I’m also mindful of the differences between renting and buying property. Both of which are something that I’d found had unique pros and cons to each.
Just like many personal finance experts, I was of the mindset that renting would always be the better option. Financially, the real estate market would never be for me what it was for my parents. The rising price of homes makes it difficult for that to happen. So, I respected the idea that homeownership might not be in my future.
However, everything rapidly changed the moment that I found out I was pregnant. Suddenly, the financial aspect was the last thing that came to mind when imagining our future. Instead, we craved some stability and reassurance that we would be able to raise our child in a place that was our own. It wasn’t about how much it might cost in comparison to our rental unit. Instead, it was about how much less stress we would carry.
To me, my mortgage debt is a happy debt. I know, it sounds ridiculous. But in comparison to my life when I held consumer debt, and the gloom and doom that put onto my mental well-being was utterly the opposite of how I felt about carrying a mortgage.
So, that’s when it hit me. The rent vs. own argument is ultimately irrelevant. At least to me, it is – and maybe to you, too.
This time, it really is personal.
When the personal finance community gathers together and does our annual “personal finance is personal” chant, what we forget to mention is that it’s really not as intimate as it sounds.
Of course, everyone has a unique situation, but to a certain extent, we are all aiming to do the same types of things with our money. We should all be saving for retirement, paying down our debt and doing our best to live within our means. Simply put: there are some things that everyone should do with their money.
That’s not the case with homeownership. The decision to buy property is hugely personal. In fact, it has nothing to do with finance, unless you are interested in real estate investing or flipping houses. If you want to find a home for yourself and your family, it’s personal.
In a recent Zolo survey, findings revealed that 60% of millennials are currently saving a down payment for a home. While there were still a few future buyers who wanted to purchase a property strictly to build wealth, the majority – nearly 40% – want to buy a home for permanence. The second reason for 27% of millennials interested in buying a home was for their family.
So, wait a minute. It’s almost as if you can’t say that renting would be a better option for these potential homeowners. Instead, it’s about their personal happiness.
Your home should never be your nest egg in this century.
Although a common reason for purchasing a home is to buy into your own future, these days, it’s not a very financially sound decision to put all of your nest eggs in one basket.
Sure, if you take care of your asset and put in a substantial amount of work each year to keep it “healthy,” it might increase. However, this is more so true if you plan only to buy one home and never move again. Which isn’t very common these days. In fact, the average Canadian will own 4.5 to 5.5 homes over their lifespan.
Therefore, when the argument that renting opens up more room for investing in the stock market comes to light, there is no argument at all. It’s true. Homeownership isn’t your most valuable investment.
However, this doesn’t change even the savviest of investors’ minds. For them, stability and permanence will always stump this reality. In other words, potential financial implications aside, people will still buy homes.
It’s not always about “paying someone else’s mortgage.”
For some reason, both renters and owners have this bitter battle that implies one option is better than the other. While you can find many logical arguments, there will never be a one size fits all solution for both people if they have different intentions and goals.
In the same Zolo survey, they also found that three in four millennials would also put off saving for retirement if it meant they could own a home sooner. Therefore, finances aren’t always top of mind or the driving force behind the decision to buy over rent.
If I didn’t have a child, I’d likely still be renting, and I’d be pleased to do so because owning didn’t make sense for me then. Now that I have a reason for permanence, and a desire not to have to worry about lease renewals and fluctuating rent, homeownership is for me.
It could be as small as having the ability to paint the walls without repercussion, or as large as a desire to feel proud to have a hand in achieving a significant financial goal like saving a down payment. Either way, it’s not about who is right or who is wrong. It’s about personal values and navigating life to achieve what you associate with happiness.