The question of whether to rent or buy your home is a complex one. On the Rent.com blog, we’ve walked you through in detail the many factors that should play into your thinking when making this big decision.
But this time, we want to zero in on the topic from a new angle: What type of residence should you choose when moving in together after marriage? Sounds complicated, right?
Fortunately, Rent.com has your back. Here are a few things to consider when planning your move as a newlywed couple:
Rent or Buy: Short-Term Money Issues
First, anyone considering buying a home needs to think about the short-term financial implications. You need to ask yourself if you will be cash-flow positive after covering all the expenses associated with home ownership.
These expenses may include mortgage, taxes, insurance, maintenance and repairs, supplemental insurance, home improvements, decorating, utilities and association fees.
A general rule-of-thumb is to spend no more than 30 percent of your income on your housing. Can you do that owning a home with your spouse?
For couples, it is easy to fall into the trap of thinking that if you have two incomes you can spend 30 percent of your combined income on housing. But here’s where we see a big opportunity for couples to prepare for their future together.
Pretend one of your incomes does not exist. By spending no more than 30 percent of only one income (usually the higher one) on your housing costs, you can put away money from the second income in an emergency fund.
Then, if there is an unexpected drop in cash flow from job loss or health problems, you’ll be prepared to weather the storm until your situation improves.
Rent or Buy: The Road Ahead
Next, you’ll need to think about the long-term financial implications of renting versus owning. Traditional wisdom holds that you should have three to six month’s worth of expenses set aside in a savings account at all times.
These days, with the economy the way that it is, we recommend having a cushion of six to nine months, if at all possible. Between wedding expenses, moving costs and a down payment, it is easy to see how a newlywed’s nest-egg could be wiped out.
If putting down a payment on a house means placing yourselves on shaky financial footing, you should consider delaying that purchase until you can build your financial reserves. Renting an apartment at this stage is a much more secure option that allows you to save money.
Rent or Buy: An Ideal Lifestyle
Lifestyle choices should play a big role in determining if you rent or buy. As a singleton, you probably only had yourself to think about in terms of how you lived your daily life. Now, if one of you gets a job transfer, the other person is affected, too.
If one of you loves the quiet suburbs while the other can’t resist city living, you’ll need to find some geographic common ground that could have housing affordability implications. Plus, renting an apartment allows you to check out different locations without making a long-term commitment. Think of it as testing various community waters.
The most important tip we can give you when making this very important decision is to communicate clearly, honestly and often about your needs and wants. Then, use that information as the basis for putting together a sound financial plan that contemplates both the things for which you can plan and some cushion for things you don’t expect.
Rent or Buy: Your Life Stage
Having just gotten married, the two of you are in this thing for the long-haul, but that doesn’t mean you’re ready to settle down. Some couples wait to have kids or still like the idea of moving around a lot. If you fall into this category, renting is a better option.
Living in an apartment gives you and your spouse the option to relocate should you need to. If you’re both still young, job changes and moving are real possibilities. Consider having a serious talk about where the two of you see your conjoined lives going. Do you want to move in the next five years? Then try renting for awhile.
Rent or Buy: Credit Score
Here’s a good relationship tip: The two of you should have a solid understanding of one another’s credit scores. These numbers may determine whether you should buy a home or rent for awhile longer.
Without a high credit score, your chances of getting a mortgage with a good interest rate are low. If you don’t think your score is where it should be, plan strategies with your spouse to get it back up. You can create a repayment plan for credit cards, student loans and car payments, for example.
Remember to be honest about your score. Your spouse’s financial situation is just as much yours as it is theirs.