Do I Need to Buy a House?

Mar 5 / Dr. Jay Zigmont, PhD, MBA, CFP®

"You have to buy a house! Owning a home is the key to wealth!" You've probably heard these sentiments before, likely from someone who is old enough to remember when anyone could buy a home for their family, usually on just one income, with a blue-collar job and a handful of kids. And often, this same person is telling you to go to college, get a job, get married, and have kids. The classic "life script."

Childfree people aren't tied into the life script, however. By virtue of opting out of having kids, we can be open to many other possibilities and becoming a homeowner doesn't have to be part of that. In short, no, you don't need to buy a house. And there are reasons you might not want to anyway. Let's take a look at what buying a home entails.

Buying a Home is Expensive

Current housing prices are far disconnected from reality. Prices have skyrocketed so much in some parts of the U.S. that ordinary Americans can no longer afford them. Wages haven't kept pace with home prices, either.

The costs involved in both buying and owning a home make this a decision you shouldn't take lightly. Depending on where you live, you may actually pay less for a monthly mortgage payment than you do on a monthly rent payment. But it's important to know that your costs as a homeowner don't end with the mortgage payments.

For starters, you generally need to make a down payment when you buy a home, and ideally, that down payment is 20% of the purchase price. This way, you won't have to pay for mortgage insurance (which protects your lender if you stop making payments on the home and they can't sell it for at least as much as it's worth). With more equity in your home purchase, you'll also be less likely to end up "underwater" on it (meaning you owe more than it's worth; this can be a major problem if you need to sell it).

Other costs to buy include your closing costs (often 2-3% of your home's price) for your mortgage loan and any other incidental costs you'll incur along the way. The expenses don't stop there, though.

Owning a Home is Expensive

If you rent your home, and something goes wrong, your landlord generally addresses it and also picks up the tab. If your water heater goes out or your pipes freeze and burst, and you own your home, it's on you to get the problem fixed and pay for it. This means budgeting for often-unknown repair and maintenance costs. When you own a house, it's only a matter of time before something breaks, so having savings means you don't have to go into debt when something goes wrong. Saving 1% of your home's purchase price per year for these expenses is a good move.

If you're going to buy a home, it helps to be in the mindset of needing to stay on top of maintenance and repairs, as well as your ongoing costs. Those ongoing (and more predictable) costs include your homeowners insurance, property taxes, and potentially homeowners association fees (if your home is in an HOA). All of these costs usually rise over time too (unlike your mortgage payments, if you've signed on for a fixed-rate mortgage).

Some people think of their residence as an investment, and while houses can and do rise in value over time, this is not guaranteed to happen. And even if it does, it might take more years than you are willing to stay in the same home. In general, it's not a good idea to buy a house if you're not intending to live in it for at least five years. Property you buy as an investment is different from the property you buy to live in. And don't forget that it also costs money to sell a house. If you hire a real estate agent, you're looking at paying 6% of the sale price to them. If you sell before the home has had a change to appreciate, you'll end up in the red on the sale.

Should you buy a house?

If you're settled in your community and ready to put down roots, and can afford the upfront and ongoing costs of owning a home, it might be a good idea for you. And if buying a home will give you a better living situation for you than renting will, that's another good reason to buy. For example, you might love your pets, and realize that buying a home will give you more space to give them a better life (plus, if you own a home, you don't have a landlord telling you that you can't have pets).

It's Okay to Rent

Ultimately, you do not have to buy a house. It's not a sin to rent. It doesn't make you any less of a real adult (which is another assertion you might have heard as a Childfree person; choosing not to have children doesn't mean we're "afraid to grow up"). 

Renting is a better choice for you if you move often, or like a change of scenery. If your job is location-based and you buy a house where your current job is, what happens if you get offered your dream job in another city, state, region, or even another country? Selling a house is far more expensive and difficult than breaking a rental lease. Don't buy a house because it's expected of you. Don't buy because you think it's the only way to build wealth. Buy one because you want to, and because the costs and realities of homeownership fit into your life and goals.
Jay Zigmont, PhD, MBA, CFP® is the Founder of Childfree Wealth®, a life and financial planning firm dedicated to helping Childfree and Permanently Childless people. Dr. Jay is a CERTIFIED FINANCIAL PLANNER™, Childfree Wealth Specialist®, and author of the book “Portraits of Childfree Wealth.” Dr. Jay is the co-host of Childfree Wealth Podcast. His Ph.D. is in Adult Learning from the University of Connecticut.

He has been featured in Fortune, Forbes, MarketWatch, Wall Street Journal, New York Times, Business Insider, CNBC, and many other publications.