Skip to footer

If you're planning on moving in the next five years, rent

If you think you want to buy a home, you should first consider how long you plan to stay in the area. If you think you might move again in the next few years, it's a better plan financially to simply rent, as the first five years are the hardest for building up equity.

|
Rick Bowmer/AP
This Sept. 2011 file photo shows a house for rent and for sale sign in front of a home in Portland, Ore. If you're thinking about buying a home, but may be moving within five years, it may be smarter just to rent for that time.

If you’re thinking about buying a home, one of the first things you should consider is how long you’re going to stay in the area. If you’re pretty sure that you’re going to be moving elsewhere within five years, you’re better off renting.

Why is that? There are several reasons.

First, the first five years of the mortgage are the worst years for building equity. The vast majority of each of your payments during the early years of your mortgage is going to go straight towards interest. On a thirty year mortgage, you build approximately 5% of your home’s value in equity during the first five years of the mortgage.

Second, much of that small amount that you do build in equity will be eaten by realtors when you sell.You can try the “for sale by owner” route to try to recoup some of that value, but there are challenges and expenses involved with going that route as well.

Third, what equity isn’t devoured by the realtors will be devoured by the bank. Closing costs are not your friend. They can add up to a noteworthy portion of your mortgage, particularly when you’re really only concerned about the small amount of equity you’d build during that time.

Finally, the housing market isn’t the giant money rocket that it was seven or eight years ago. At best, home prices are stable. In many areas, they’re still drifting downward. You’re not going to make a mint by buying a house, waiting a year, and then flipping it. If you’re reading any personal finance advice that suggests doing so, check when that advice was written. I’m willing to bet it was in 2008 or before.

If you’re thinking about buying a home, one of the first things you should consider is how long you’re going to stay in the area. If you’re pretty sure that you’re going to be moving elsewhere within five years, you’re better off renting.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.
editor@csmonitor.com
Subscribe
Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

Subscribe to insightful journalism

QR Code to If you're planning on moving in the next five years, rent
Read this article in
https://www.csmonitor.com/Business/The-Simple-Dollar/2012/0817/If-you-re-planning-on-moving-in-the-next-five-years-rent
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe