Did You Buy a Home Too Early?

My wife and I are getting really excited about moving in the next year. As a result of starting to plan for our move, we’ve started to think about buying a condo instead of renting. When we compare mortgage payments for condos that we would want to buy and the cost to rent a place, both options are about the same price. It doesn’t take a rocket scientist to figure out that if you are going to pay the same in rent, it is better to buy your own place and build equity than to rent forever.

Why Buying a Home is Attractive

On top of the obvious equity in a home that we would be building as homeowners, my wife and I also like the idea of buying a home earlier because it means that we can lower our housing costs that much earlier before retirement. This is one of the ways that people can retire early. By significantly reducing your costs, it makes early retirement that much more attainable.

On top of the expenses aspect, we also like the idea of being able to set our own rules. There’s no fine line between being too loud or too quiet. Having a dog doesn’t require pre-approval. We don’t have to wait weeks to get a small repair taken care of. The list goes on and on.

Home Ownership Can be Risky

While there are many benefits to owning a home, it isn’t without it’s own risks. You are investing a lot of money in real estate without knowing if something might happen that would take it all away. There is insurance to cover most disasters that will happen, but there’s always something.

On top of possible destruction to your home, owning a home also means financial risk. Buying a home at this stage in our life would mean that we would buy a home without 20% down. That means we would likely be forced to pay PMI, or mortgage insurance. While this isn’t the end of the world, it does raise our monthly cost. If we were to take on this risk, we’d probably consider getting mortgage protection so that we aren’t putting too much of our assets at risk. While I love the idea of growing equity sooner rather than later, I also hate the idea of going bankrupt because we simply can’t afford to pay the bills.

Jumping into a mortgage too soon is a great way of putting yourself at unnecessary risk. Disaster may not strike and you may be fine. BUT, something bad could happen and leave you in a bad position. If you are wondering whether you should buy a house as a young adult, I would recommend waiting until you have 20% to place as a down payment. Not only does this mean your mortgage payment will be lower, but it is also a sign that you are financially stable enough to take on such a large endeavor.

4 Responses to Did You Buy a Home Too Early?

  1. eemusings says:

    We definitely didn’t buy a house too early (haven’t yet!) It’s much more expensive than renting where we are, and we want to be more settled financially/career wise. We’re about to fulfil a dream of longterm travel and that wouldn’t have been possible if we’d already owned a house. Once we’re back, though, house buying will be our financil priority.

  2. Renting in short-term might be practical. It could be less expensive to rent short-term. The owner pays taxes,insurance and upkeep. The renter doesn’t need to budget for this kind of unexpected expenses, however the rent is really a total loss. Home ownership creates equity in the home.

  3. […] @ Young Family Finance writes Did You Buy a Home Too Early? – My wife and I are getting really excited about moving in the next year. As a result of […]

  4. […] @ Young Family Finance writes Did You Buy a Home Too Early? – My wife and I are getting really excited about moving in the next year. As a result of […]

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