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I was wondering why most people rent when they could put the loan money into making payments on a house. Wouldn't you then get this money back?
Where do you live?
- Thread starter kilroth
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Your logic is understandable, and I too think that's the right way to go about things (paying toward a mortgage). Those of us who lived a working life between undergrad and med school are in a much better position to consider such a plan compared to someone fresh out of undergrad.
However, several issues may prevent most med students from doing this:
- Coming up with a downpayment for the mortgage
- If one already has an undergrad loan and they don't have a job, it would be tough to get approved for a mortgage. From a bank's point of view, borrowed money is not sufficient collateral for a mortgage (again, unless there is a huge downpayment and even then it may not cut the mustard without an income).
- Time: It's quite a task to locate and settle a huge transaction like a property purchase under such short time constraints. If one gets in off a waitlist, they may have literally a month or less to relocate and get settled. It's much easier to sign a lease and have an apartment.
- Finally, as you will surely find out (if you haven't noticed already), most med students aren't the brightest people on the planet, and the odds of them making brilliant financial decisions are slim to none. 😛
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Well, for one thing, your loan money will not be enough to cover a down payment and you can't really apply for a mortgage for a house with a promise to make payments to a bank for the mortgage using future federal government loans (technically an illegal usage). Even if you could, I wouldn't advise it as purchasing a house is associated with a significant amount of risk. Property values can depreciate with time and market values fluctuate, so when you are ready to sell your house in 4 yrs, there's no guarentee that you will be able to sell it for the same amount that you purchased it. That's even if you would be able to sell your house in four years, sometimes houses can be on the market for a year or more before it's sold, kind of screwing you because if you move away for residency you will have to be covering your new place's rent plus making payments on your old mortgage. Even if you would be able to make a profit selling your house in four years, you still end up losing ~10% of house's value paying off fees (realator, bank, contract, etc fees) every time you sell and buy a house. A good rule of thumb is that if you don't plan to live in the area for for more then ~5 yrs, it's better to rent financially. If you plan to live there for 5-7 yrs, it's iffy; more the 7 yrs then you should probably buy.
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Seems simple doesn't it? Like most things, of course, it isn't as simple as it seems. After the issue of coming up with a down payment, etc., what happens when the roof leaks and it is going to cost $5,000 to fix? That is why I like to rent when income is minimal. I currently own my third home (I move alot), but I can tell you that I don't want the headaches of homeownership when I start school. You may or may not walk away with money at the end. I am selling a home that I have lived in for two years - I won't make a dime (other than the tax benefit of owning) - my rent on the home would have been less than the mortgage, so financially it will be a wash. But I tell you, when the central air conditioner goes and I have to write a check for $900-$1500 (on the very cheap end) I will wish that I had just rented!
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It may come down to personal preference, but I think owning a decent townhouse/condo is prefereable to renting in many ways (aside from the cost). Renting an apartment goes hand-in-hand with loud neighbours, slow crowded elevators, potential break-ins in the building etc. There's a certain tranquility about having your own "space" without worrying about those disturbances. Finding a property that is 3-5 years old would surely reduce the maintenance costs and most likely provide you with a more comfortable place to live (with nicer trimmings too!) and the convenience of having laundry in your home (which is a huge plus as a med student if you ask me). I know many apartments come with laundry in the unit, but most I've seen don't (correct me if I'm wrong).
Money aside, I think the slightly higher cost of owning a nice place is well worth it after a crappy night in the Internal Meds wards. But again, that depends on where you go to school and how much time you'll have to spend at home.
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I think a big reason I rent is that I don't feel mature enough to own something such as a house. lol. I started med school at age 22 and have never had a "real" job. I wouldn't even know where to begin. And renting has minimal hassles--my apartment complex is in a very nice part of town and is extremely safe. I live on the 1st floor and so I have a patio and a yard, complete with bushes, trees, and flowers maintained by the management company. They also change my air filters, light bulbs (i have 9 ft ceilings so it's difficult for people to change without a ladder), etc. Basically, I don't have to do anything to upkeep my place. And that is just what I need whenever there is a huge test coming up and I don't want to have to focus on anything else. Plus, it isn't loud--I can't hear my neighbors and even if I could, the majority are in grad or professional school or are young people starting families.
Now, renting while in residency--that's a diff story. 😱
Now, renting while in residency--that's a diff story. 😱
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i own a small townhome that was remodeled in 1997. less than a mile to school - walkable. the housing market in ann arbor is pretty safe for investments. but hey, even if i lose money, i'd have lost it in rent anyway, eh? the rental market in ann arbor is also very steep, so what i pay for my mortgage and association fees monthly (thank you great interest rates) i would have paid at least that in rent for something comparable. buying was a great option for me. plus i worked for 4 years prior to moving here and still had a full-time job when i bought the place - i.e. i had downpayment money and a documented salary to get the mortgage. i still work part-time, so i'm not using only loans to make my house payments. my part-time work pays probably 80% or so of my mortgage monthly.
to each their own. 🙂 i love my place!
to each their own. 🙂 i love my place!
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Waht kind of a 3rd world country do you live in?!?!?!? 😱 😱
No landlord would ever be able to rent in the UK (not to me anyway) without a washer/dryer in the property.
Incidentally I live in a rented detached house with a lovely garden which I don't even have to maintain. Nice 🙂
I didn't buy a house to mortgage because I couldn't put up the deposit without cleaning out my parent's bank account, and I wouldn't feel comfortable with that. Soon as I finish med school though...
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Most apartments in the US do not have washer and dryers or even W/D hook-ups in the unit. They have coin laundry facilities. But condos, duplexes and and some townhomes do have atleast W/D hook-ups. Different country, different economy, different priorities. My father lives in England and it is way different. As for buying, it also can depend on where you are and what school you are at. Coming from CA, the real estate market here in Saint Louis is weak and the cost of living is lower. You can get a whole lot of house for not much; compared to CA. However, one of my concerns is selling in 3-4 years. Also, my school's financial advisor told me that having a house would be an asset and counted against me, making my student contribution higher; tuition is $39,000 a year. And I would not qaulify for scholarships and some of my loans may be taken away. Our friends had their parents buy a home, but they pay the mortgage. My wife and I are looking to do this now. Good luck!!
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I think this is too large a generalization. Maybe this is the case where you live, but I've had apartments in 2 states and every apartment I have looked at had either W/D in unit or W/D hookups. Perhaps you guys are just living in the wrong places. 😉
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Fiona said on the property, not in the unit. In my experience, most apt. buildings/ complexes do have on-site laundry.
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Most does not mean all, but fair enough, I correct my statement. Most apartments in California do not have washer and dryers or W/D hook-ups in their units, or "in the property" as stated by Fiona. And living where I live now, I am certain that California is not the wrong place to live. 😉
