Is your Castle a Palace or a Prison?

Your home is your castle. Your choices are the difference between your home becoming your palace or your prison. Living in an expensive city, I get asked one question a lot: ‘Is it better to rent or buy a home?’ And the short answer is the most common for financial planning: it depends on your situation.

Your home is your castle, your keep, and it is an essential determinant of your quality of life. You probably spend a lot of time there, and it can lift or suppress your mood. A dark, cluttered or dreary home can have a negative effect on your mood. Whereas, a home that is clean, spacious, and bright can be a mood booster. It can also boost your feelings of wealth. It is not always about luxury budgets – as even if you currently can’t afford ‘spacious,’ you can always afford ‘clean.’

But does it matter if you own your peace of paradise or rent it? Or, as is most common today, the bank owns it and you are a minority shareholder? I will go against the grain and say no, overall it does not matter. Your castle is your kingdom despite who is ultimately on the title deed.

We are pressured to buy homes. I have heard clients say they need to own because they have children, or because they are feeling peer pressure. While it is very nice to own your home, in my experience your children will not know or understand the difference unless you make it a point with them. Your peers may not be able to tell either.

I do believe in home ownership, but I also believe it is not something you want to rush into, timing is critical. Other than who you marry and how many kids you have, it will probably be the biggest financial decision you ever make.

Many people talk about the wonderful gains they have made in housing, but few brave souls talk about the losses they have incurred, or the total cost. The right house is a piece of paradise, and the wrong one can be a huge source of stress. This is not to scare you, but I have seen many horror stories of people rushing into home ownership, impulse buying and skipping necessary quality checks, or buying too much house, on FOMO. That ‘dream’ home can become a mirage after purchase and become a money pit costing them a decade to recoup.

Go slow: Do your research and learn your preferences. Unless you rent the house you are planning to buy, you cannot ‘test drive’ your home. So you need to ensure the location, layout and budget is right for you. There unfortunately is no ‘Airbnb-to-buy.’ You need to plan and be clever in these markets, especially if it is your first home.

Here are some guidelines to assist you in your decision to rent or buy your next home. If you need more detail, I have a whole chapter on this in my book Compass Star.

You should consider buying a home over renting if:

       The total cost of homeownership is cheaper than renting over time.

       You are ready for the responsibility and freedoms of homeownership.

       You can stay in the home (or own the home as a rental) for at least five years.

       You are not living in an area with an overheated or volatile market and are thus able to do the proper quality checks on the home before purchase.

If you are currently renting or deciding to rent, know that it is not a ‘waste of money’ as it is providing a roof over your head, which is a basic need. In some circumstances, it may benefit you much more than buying at this time in your life. In fact, with all the extra costs and responsibilities of homeownership, renting can make a lot of sense in some circumstances.

Most of all, don’t let anyone shame or pressure you into a home (or rental) purchase, unless they are willing to pick up the costs. This is your decision and your life. And you’ve got this.

Do you feel renting is better than owning for you right now?

Disclaimer: This article if for educational purposes only and is not personal financial advice.