In a world that often promotes homeownership as the ultimate goal, Personal Finance Expert Rachel Cruze offers a different perspective. In her recent YouTube video, she explains situations where renting might be financially smarter than buying.
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Despite the myth that renting is “throwing money away,” Cruze argues this isn’t always the case. For some, renting may even be the wiser financial choice.
Here are her five signs you might be better off renting.
You’re Moving to a New City
One of the biggest reasons Cruze suggests renting is when you’re moving to a new city.
“If you’re moving to a new place, you want a good sense of what is going on in the city and the part of the city that you’re looking at,” she said.
Every city has unique neighborhoods, traffic patterns and vibes. Living there for a while is often the only way to understand what fits, and buying a home in an area that might not be right for you could be a costly mistake.
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You’re Going Through a Major Life Change
Life changes like getting married, going through a divorce or finishing college can also be signs that renting is the better option.
According to Cruze, these moments come not only with their own financial pressures, but with emotional challenges that can cloud judgment. “If you haven’t bought a home yet, it’s still really wise just to pump the brakes a little bit on that big investment and say I’m going to get through this big change first and foremost.”
You’re Dealing With Debt
Adding homeownership to existing debt obligations can easily stretch a budget too thin, especially for those already living paycheck to paycheck.
According to the New York Federal Reserve’s 2024 Quarter Two Report on Household Debt and Credit, the total household debt recently rose by $109 billion to reach $17.8 trillion, with mortgage balances climbing to $12.52 trillion and credit card balances increasing to $1.14 trillion.
Home repairs can be expensive, and without the cash flow to cover these costs, the situation can quickly spiral.
You Don’t Have an Emergency Fund
Another red flag for buying is not having an emergency fund in place. Cruze emphasizes the importance of having savings for unexpected expenses.
“Homeownership is so expensive,” she said. “If you’re having to replace expensive things in the home, you need money to do that.”
Without an emergency fund, homeowners could find themselves scrambling for cash to cover urgent repairs. When renting, the landlord typically handles these expenses, making it a more secure financial choice until savings are in a better place.
You Don’t Have a Down Payment Saved
According to the National Association of Realtors, the typical down payment for first-time homebuyers hit 8% last year, the highest since 1997. Cruze recommends that new buyers aim for at least 5%, ideally 20%, to avoid the added cost of private mortgage insurance (PMI). If that money isn’t saved up yet, renting can be the smart option until a down payment is secured.
Cruze’s advice is straightforward: renting isn’t a bad decision, and there are plenty of situations where it makes more financial sense than buying a home. Homeownership can be a great long-term goal, but jumping in too soon can lead to financial struggles. Rent if the timing isn’t right, clear debts, build savings and wait until you’re financially stable before locking into such a big commitment.
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This article originally appeared on GOBankingRates.com: 5 Financial Signs You Should Be Renting, Not Buying a Home, According to Rachel Cruze
