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Most Americans Would Rather Pay a Mortgage Than Rent

By Daniel B. Kline – Updated Sep 24, 2019 at 3:38PM

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Owning a home makes people happier, but that does not mean it's for everyone.

Sheryl Crow was only partially right. Things that make you happy can sometimes, in fact, "be that bad."

She actually nails the dangers of pursuing happiness over all else in the second half of the chorus when she sings, "If it makes you happy, then why the hell are you so sad?" That explains the dangers of buying a home, something that 93% of Americans say makes them happier than renting, according to Bank of America's 2019 Fall Homebuyer Insights Report.

Homeowners report being happier, in a broad sense, because they feel homeownership offers an improved lifestyle and a variety of hobbies associated with their home. All the gardening, remodeling projects, and backyard barbecues in the world, however, won't make you happy if you buy a home at the wrong time.

A for sale sign on a home wit a sold sticker on it.

Buying a home is not always a good idea. Image source: Getty Images.

When is it wrong to buy a home?

The less positive part of homeownership can hit in a number of different ways. The first, of course, is when you take on more home than you can afford and/or don't account for all of the nonmortgage expenses. When you own a home, you have to heat it and cool it, and sometimes things break and need costly repairs. An unexpected expense -- or an economic downturn -- can be crippling if you haven't planned ahead for it.

Poor financial planning is not the only way buying a home can make you sad. There's another scenario you should be careful about, according to Millionacres (a Motley Fool company) founder Austin Smith.

"While we believe buying a home is often a smart financial decision, there are still many reasons to consider renting instead," he said. "Mobility is the biggest. If you aren't sure you'll be in the same location four years out -- renting almost always makes more sense."

That's generally the breakeven point from a financial perspective -- where you recoup closing costs and other money spent buying the home -- but there's no exact rule. Smith cautioned that you should consider your circumstances closely.

"It varies by location, but as a rule of thumb, if there is a good chance you'll be moving again within four years, the closing costs and other headaches associated with owning a home won't be worth it," he said. "Equity and appreciation most likely won't have caught up with your interest payments relative to rent and you'll come out modestly behind."

If you buy a house with less than 20% down, however, the timeline might get pushed out to five or six years. That's because you will most likely have to pay private mortgage insurance (PMI), which is an added cost to the buyer that solely benefits the lender.

Of course, buying is just not right for some people. "There are also lifestyle factors, like not wanting to deal with unpredictable maintenance and repairs," Smith added.

Know what you're getting into

When you buy your home, it's important to understand what might happen if you need to sell it. Although you may plan on being there for a decade, your work situation or something else might force you to move.

Plan for the unexpected so you're ready when something goes wrong. Study the area and things like the school system and town parks -- even if you don't have kids -- because they factor strongly into a house's resale value.

Owning a home should make you happy. It's a major accomplishment, and one you should not enter into lightly. There's no shame in renting until your finances are in order and you're reasonably sure you won't be moving for a few years.

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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