Buy or rent? 5 year plan

[078]

I have a question that I hope you can all help me with. I have saved money for a down payment on a house in my plan was to buy a house, but now I'm not sure whether it is the right choice or not. The problem I have is that I will only be staying in the area) including for five years. At that time I will move, so I'm wondering if this is enough time to make buying a house worth while or if I should rent.

The problem I having is that on a 30 year house loan for the first five years almost all the payments go forward interest meaning that I wouldn't build much equity in five years. When I include all the fees for buying the house and selling the house, plus the extra costs that a house has, I'm not sure whether buying the house really make sense.

Is there a general rule of thumb of how long you need to own a house for it to make sense to buy one? If you were in a similar situation as I am, what decision would you make? What are the important things that I need to consider when making this decision?

[disneysteve]

I wouldn't buy if I knew I would only be there 5 years. As you point out, you'd build very little equity, mostly pay interest. You'd lose all of the buying costs and you are taking the gamble that the home will sell for enough to recoup your investment. How many people took that risk 5-7 years ago and got totally screwed when the market crashed?

If I were in that situation, I'd keep renting. We didn't buy our home until we were as sure as we could be that we weren't going to be moving anytime soon. Next month will be 18 years that we've been in our house, the first and only home we've owned and we still have no plans to move at least until retirement another 15 or so years from now.

[jpg7n16]

Here's a very interesting calculator that Nightfly posted not too long ago. From New York Times:

Is It Better to Buy or Rent? - Interactive Graphic - NYTimes.com

[woodie96]

The gov't keep ssaying that the housing market has hit bottom, then a few months they repeat it again.
I don't think that 5 years would give you enough time to recoup most of your upfront expenses, even if the market did do a slight rebound.

[078]

It seems that the consensus is that I should continue to rent instead of buying a house now. That was pretty much the conclusion I have come to as well. The only thing that I have trouble with is that at this time I don't know if I'll ever live someplace more than five years. I guess that may change in the future and I will see that I want to settle down somewhere, but if I go through life and move every five years, that mean that I will be a perpetual renter?

I think I'll be fine with that, but it seems to go against the wisdom of all the financial advisers that buying houses a smart move to make. What length of time that I need to stay in the house to make it worthwhile?

[beequeen]

I would rent if I were you, I am in a similar situation and it has taken me 2 years to sell my house. I think the market will go down further, best case is that it will stay the same. I don't see any appreciation in the next 5 years. But then again who knows for sure

[elessar78]

Here's a very interesting calculator that Nightfly posted not too long ago. From New York Times:

Is It Better to Buy or Rent? - Interactive Graphic - NYTimes.com

this is awesome!

[ecoadapt]

I'd go for renting. 5 years isn't that long,time really flies fast.

[disneysteve]

I don't know if I'll ever live someplace more than five years.

Then you may never be a home owner, and that's perfectly okay. The government has tried its best to brainwash people into thinking that they must own a home to be happy and fulfilled in life. The truth is that home ownership is not right for everyone either for financial reasons or lifestyle reasons or employment reasons or some other reasons.

it seems to go against the wisdom of all the financial advisers that buying houses a smart move to make.

I'm not sure I'd use "wisdom" and "financial advisers" in the same sentence.

[creditcardfree]

I was going to suggest that same calculator. I'm curious what results you get when you enter your costs.

[AccountantSalary]

Five years seems to short to be buying a house. Why not just continue to rent and save more money, so you can afford a better place when you're ready to settle down. There are lots of home owner expenses you're probably not taking into account right now: taxes, yardwork, maintenance, etc. Money you would be spending on that can be save to a down payment.

[078]

Okay, this is a little strange. For the longest time I have been saving so that I could buy a house, and now that I have the money for a down payment, I'm trying to come to terms that I may never own a house. I realize that things can change in life and there may be a time when I want to settle down for a long period, but I just don't see that in my future at the moment.

I'm not sure why this shocks me so much. I guess I focus so much on saving the money for the house that I never really considered whether buying a house was the right thing for me or not. Now that I've started to consider it and it seems to make sense not to own a house, I'm a little at a loss of why I spent so much time trying to gather that down payment.

It's not a bad thing is now I have a nice sum of money, but I think it's going to take a little while for me to get my mind around this new way of thinking.

[kork13]

It's not that buying a home just isn't for you... Just perhaps not right now. I'm in the same spot right now, where I'm moving somewhere that I could easily buy a house, but I'm only expecting to live there for 3-5 years. Sure, I could almost certainly rent it when I left (given the market there), but it just doesn't quite make sense for me to buy right now. Just keep saving, eventually you'll be able to stay in one place for a longer period, or a place that you know you want to come back to, and by then you'll have the cash to pay for a significant chunk of it all at once.

Honestly, 5-8 years is typically a sort of middle-ground where buying can be worth it, or renting can. The calculator posted by JPG is pretty good, so you can use that as a guide. If you found something that you absolutely love, I might still consider buying if it's something you know you would want to come back to. But don't wrap up your identity in whether or not you own a house... In the end, it's just a roof over your head. Rent or own, it's really not so important as to have a major personal conflict over it.

[078]

I know it seems a bit strange to get so caught up in this when the logical thing is not to buy a house. I think that I'm slowly coming to terms with that. It was just that I was so focused on saving for the down payment so I could buy a house that this revelation has been a bit of a shock.

The one good thing is that I actually thought about this before I bought a house. I was so focused on buying that I could've very easily not stepped back and takenn a look. If nothing else, my savings account sure will look good for a while.

[elessar78]

It's not that buying a home just isn't for you... Just perhaps not right now. I'm in the same spot right now, where I'm moving somewhere that I could easily buy a house, but I'm only expecting to live there for 3-5 years. Sure, I could almost certainly rent it when I left (given the market there), but it just doesn't quite make sense for me to buy right now. Just keep saving, eventually you'll be able to stay in one place for a longer period, or a place that you know you want to come back to, and by then you'll have the cash to pay for a significant chunk of it all at once.

Honestly, 5-8 years is typically a sort of middle-ground where buying can be worth it, or renting can. The calculator posted by JPG is pretty good, so you can use that as a guide. If you found something that you absolutely love, I might still consider buying if it's something you know you would want to come back to. But don't wrap up your identity in whether or not you own a house... In the end, it's just a roof over your head. Rent or own, it's really not so important as to have a major personal conflict over it.

Kork, you've posted two great things on the subject. Thanks. I struggle with the same questions. Now we're in the process of looking for a house and I'm only half-heartedly convinced we should actually buy one. But rent is relatively high in our area and there is a dearth of good rental property (location) in our area since we're rural.

Part of it is what I mentioned above and the other is the fact that our little girl needs some space to run around in. My wife feels this more than I do, but I'm not going to say it's an invalid position. Sometimes it's not all monetary.

I grew up in small spaces in the city and never felt like I didn't have room to "run". But my wife grew up on a farm, so there's differences in that.

Any advice for a situation where you're not sure you'll be stationary for 5-8 years but does need the space for a growing family when there are few rentals? I don't believe buying is completely right for us at this point.