Rent vs. Own

[mmg19]

My house has sold and I need to decide whether to rent or buy smaller house.  Downsizing was a financial necessity and although I have kept payments up to date the upkeep and maintenance have kept me on a bare bones budget. 

 

My options are a townhouse to rent which would allow me to fully fund the match of my 401 and build up the emergency fund.  A house is for sale in area which I could afford but the taxes, insurance, upkeep would put me above the amount of what it would cost to rent.  Another option would be to rent for a year and save as much as possible to buy later.  My FICO score hopefully would be higher in a year and I could get a lower interest rate.  Credit cards are finally paid off but it will take a while to raise score.

 

Any thoughts, suggestions, or experience with a transition from owing to renting would be appreciated.

[donswife]

Hi

if I decided to sell my house and I have imagined I would rent for at least a year

we built the house together (just finished a 2 year renovation right before he died)

so I am really emotionally attached

But the upkeep is exhausting

so I imagine would be so nice for a break to have someone else do all the upkeep by renting

plus its seems like a bonus for you to save some money

good luck in whatever you decide

[MissinGrizz]

With the tax breaks buying may make more sense but emotionally it sounds like you should rent for a year and then decide. Building the 401k is a great idea and shows looking forward

[BrokenHeart2]

Great advise given already. What a frigging journey isn't it.  Best of luck to you.

[mmg19]

Thanks. 

Donswife - I'm not attached and the selling was not difficult for the boys either.  I understand where you are coming from.  You are so right about the upkeep.  I really worked on repairs and maintenance this past year so it would sell.  Family and friends painted all the inside and outside is at its best right now which I think helped sell it fast. 

 

MissinGrizz - As far as tax break, I think I have a year to buy without penalty.  I did make a profit and the equity was considerable and my goal originally was to be able to have a very small loan to buy since I would be downsizing.  My boys like sharing a room so going to a 2-bedroom townhouse is no problem for them.  We all end up in the same room now if we watch tv or family stuff.  So losing a rec.room is no big deal.

 

BrokenHeart2 - Sure is a journey but not one a wanted.  The year of illness, treatments, and limited income did a number on our income as well as create credit card debt.  I had to look for full time vs. the part time work I had before DH died.  It's the decision making that is hard right now.  Need to stay in school district for boys, keep commute to work as short as possible, and not let boys feel their lives are experiencing another traumatic change. 

 

I'm aware this change is different for everyone.  It's  been 15 years since I've rented and I liked the stability of owning my home, but the biggest part of that stability is gone.  Half of the stability is gone and I waited as long as I could do make the change.  Renting in grad school and no children and even the first years of marriage seem like a different lifetime.  We rented and saved to buy a home now I'd be renting to fund retirement and save for college.  Sometimes it is mind boggling and I'm doubting I'm up to the task.

[IfIonlycould]

mmg- as a "single" homeowner you are entitled to 250,000 profit before capital gains tax sets in on the sale of a house.  That is profit...that means if you paid 200,000 and sold it for 450,000 you are free and clear....if you bought it for 200,000 and sold it for 500,000 but can show receipts accumulated over the years that you did more than 50,000 in capital improvements you will still be free and clear of capital gains tax...forever, no one,two or any amount of years before you buy the next house will affect that.  There are many calculators online to decide if buying v. renting is right for you.  They allow you to input the amount of down payment, interest rate, property taxes and cost of yearly maintenance v. the cost of rent, possible money lost from no realization of equity and no federal tax breaks if you itemize your taxes,  and possible money gained from being able to invest the cost of down payment, closing costs and home maintenance fees you are not incurring.  This may help you to make a better informed decision.  From the little you have presented renting may be an option for you given that it sounds like you do not qualify for the best interest rate right now and you will be able to fund your 401k to the match point (like giving yourself a raise).  Not a bad idea to save for retirement.  Many believe that buying a home will build equity to fund retirement but unless you have the ability to buy a fixer upper and put sweat equity into it a home should not be viewed this way.  Just ask anyone who went through the real estate bubble burst.  Try the calculators I suggested they may help you to make a decision.  It sounds to me like you are leaning toward renting, saving for the future and buying when you are in a better position to buy.  Good luck and sorry if told you info you already knew.

[mmg19]

Appreciate this info.  I had not yet checked the capital gains tax and was really outdated on my knowledge.  The calculators I will be trying this week-end.  I certainly did not have a gain that would cause tax.  Actually with my equity and profit I will be able to not have a large mortgage. 

 

FICO was impacted by debt to credit ratio and that should start going up rapidly now that all credit cards are paid off.  No other derogatory records, no bankruptcy, or liens.  I can get a loan but don't like the interest rate when I know in a short time it will be lower for me.

 

The renting only concerns me that I will have very little outdoor space.  My boys (12 and 14) will be spending a lot of time with grandparents this summer and have a week of camp so it won't be too bad.  At least the townhouse available for rent is in same school district and a short work commute for me.  Thanks for telling me about the calculators.   

[Guest mawidow]

It's possible that if you sold within 2 calendar years of being widowed, the capital gains ceiling rises to $500,000 because the IRS counts your spouse as co-resident.

 

The stress reduction of renting instead of owning was huuuuge for me - I'm not handy, don't have a green thumb, and was sick of shoveling snow and doing all the work for my pain in the a$$ condo association. Just one widow's experience. Sending support!

[Max2507]

I would certainly consider renting and bolstering your savings and retirement. Does the townhouse neighborhood have any amenities like open spaces, pool, etc? Are parks available nearby? I have a lot of properties and am overwhelmed with the "my such in such isn't working when will it get fixed?" Makes me want to rent because if something happens just call the landlord. No outdoor maintenance is nice. Before you know it your kids will be grown. Are you sure you want to stay there even after the kids are grown?

[DansSoulmate]

Hi, I just put my house on the market because I simply can't keep up with it and (as someone else described on another post) my house truly terrifies me.  When it sells  my plan is to move about an hour and a half away and rent for a year to decide where I want to live longer term.  I had considered just buying another place but honestly I feel like I've been endlessly running a race since Dan's passing and need time to really recover, reflect and re-evaluate my options.  Best of luck in your decision!

[Guest TooSoon]

I'm about ready to walk away from "the dream" and rent for a while until I figure out what in the hell we are going to do and where we're going to do it long term.  It has taken me two and a half years (plus the two when he was dying) to get to this point. Now I know it's not grief telling me to run but life telling me it is time.

[Trying]

I am all about simplifying.  If that means less financial burden or less time spent on upkeep and repairs or both is a matter of what is stressful to you.  I am big on security for retirement because I work with seniors and I see the downside of relying only only social security.  My current house is way too much work as well as too much money so I am selling it.  For the area I live in, with kids, there are no real rental options so I am buying a smaller home but the idea of renting and having no maintenance responsibility sounds wonderful. 

 

Amazing how our "dream" and what we think we need changes.  This house was our dream and we had 13 amazing years here as a family.  The last 20 months have felt more like this house is an anchor weighing me down.