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Question:


Homeownership is the American Dream. I get it. But am I a failure for continuing to rent at the age of 45? What am I missing out on?
-PeterLiu


Answer:


Whether you are a success or a failure does not hinge on whether you own a home or rent one. In fact, during the plunge in prices that began in the middle of the last decade, many a renter must have felt pretty successful – at least relieved, maybe downright smug – for not having to worry about foreclosure, negative equity, loan modifications or just the relentless erosion of value that many homeowners were forced to contend with. Two broad factors go into determining whether homeownership is the right choice. Probably the more important one is how owning a home would fit with your personal circumstances. If your family situation is stable – no marriages or divorces on the horizon or children coming or going – and you have a job that you feel is secure enough that you can count on making the mortgage payment every month, then owning seems sensible. It also helps if you’re fairly certain that you won’t be pulling up stakes and moving in the next few years.

The other consideration is financial. It’s not just a matter of having enough money to make a healthy down payment and then the monthly ones, although that’s a big part of it. You need to run the numbers and compare the cost of owning versus renting. A good rule of thumb is that if the mortgage payment, including any required insurance, is less than the rent on a similar property, then you would be wise to own. Just make sure that you factor a repayment mortgage into your calculations, not an interest-only loan, so that you would be accumulating equity. Owning will still be riskier than renting because any loss falls on you, but with prices nationally about where they were a decade ago, the risk/reward balance would seem to be favorable. And the risk diminishes for owners who are certain that they can keep up with the payments and will have no need to sell for quite a while.

-Conrad de Aenlle



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