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Columns | Go Far With Kovar

Is it Better to Buy a House or Continue Renting,
Given My Financial Situation?

by Taylor Kovar

Hi Taylor - I'm probably about 20 years from retirement and I'm thinking about buying a house. I still have two kids that live at home, I'm a single father, I have $150,000 in my retirement account, and $180,000 in cash. Is it worth buying at this point, or should I stay in the rental market? - Ron

Hi Ron - Boy, you're right on the line between buying and renting. On the one hand, you have the cash to do it. On the other, you still have kids to care for and you need to keep building that retirement fund. Let's go over some of the variables and see where we land.

1. The finances of buying. Everyone faces different variables when it comes to home buying, and in your case it might come down to the affordability of the house. I don't think you should be looking to buy a $400,000 home, but I think you might be able to get something under $300,000. As long as your mortgage doesn't get too much higher than your current rent, and you don't use too much of your cash on the down payment, the equity you build might make up for the added expenses.

2. The cost of buying. Keep in mind that owning a home puts more on your plate than just expenses. Moving into and maintaining a house takes a lot of effort, so make sure you'll still be able to find a balance between your new project, work, and your family. If you're 20 years away from retirement, you might not want to bring a lot of added stress into your life right now, especially if your job takes a lot out of you. You need to factor quality of life into this decision. Buying a house might make sense on your balance sheet, but it could also prove to be a little overwhelming.

3. The bottom line. You need to avoid getting a bad mortgage (naturally). I recommend you don't take anything more than 15 years, possibly 20 years if you get an incredible rate. After that, you need to think about your schedule, budget, and plans for the immediate future. Consider retirement, but don't ignore the 20 years you have between now and then, and whether buying a house will impede any of your other aspirations.

As long as your earnings are steady and can cover most of your costs, you can look into buying an affordable house. If you're thinking about spending all of your savings, tripling your monthly expenses and taking on a 30-year mortgage, I would definitely advise you keep renting instead. Hope it all works out, Ron!


Taylor Kovar June 22, 2018
More "Go Far With Kovar"

Disclosure: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. To submit a question to be answered in this column, please send it via email to Question@TaylorKovar.com, or via regular mail to Lessons on Wealth, 106 E Lufkin Ave., Lufkin, TX 75901.

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