SOURCE: Certified Financial Planner Board of Standards

CFP Board

November 18, 2009 13:02 ET

Buying Versus Renting: Homeownership Is Not for Everyone

WASHINGTON, DC--(Marketwire - November 18, 2009) - The New Financial Realities: Personal Statement by Eleanor Blayney, CFP® Consumer Advocate for the Certified Financial Planner Board of Standards (CFP Board):

In the current financial crisis, we have learned that we can no longer afford to look at homeownership as we did in the bubbly pre-recession days. There are new financial realities; we must re-examine some basic assumptions and consider some new approaches. Over the course of this series, we are looking at nine important financial strategies. This week: Get smart about the pros and cons of homeownership.

Homeownership has long been the American dream; but while owning a home can be a smart investment for many, it is not for everyone. As the recent collapse of the housing bubble, increased foreclosure rates and declining home prices have shown us, owning a home you cannot afford can turn into financial disaster.

Before deciding to buy, do the math; for many, renting may be the right strategy to accumulate wealth and secure long-term goals. Here are a few things to consider:

--  The cost of homeownership is more than just the mortgage payment.
    Maintenance, home repairs, taxes, and property insurance factor into
    homeownership expenditures.
--  Owning a home calls for commitment. Unlike our grandparents or even
    parents, we Americans do not stay put.  We are a transient society, moving
    frequently for jobs, education, relationships, family. Owning a home for
    less than five years rarely makes sense, given the transaction costs of
    buying and selling, and the now very real possibility that the home will
    not appreciate over that short time period.
--  Tax incentives alone should not influence your decision to buy. There
    are several tax incentives to spur homeownership, including deductions for
    mortgage interest and property taxes, as well as credits for home
    purchases.  Factor these savings into your decision-making, but do not buy
    a home for the tax savings alone.  Even a sizeable one year credit cannot
    turn an investment which does not suit your lifestyle, your cash flow, or
    your needs into a smart decision.

As the Consumer Advocate for CFP Board, I want you to remember that buying a home is not an easy decision. Get a pencil and paper, a spreadsheet, or better still, the assistance of a CFP® professional to figure all the costs associated with homeownership, as well as the benefits. Stress test your analysis by considering some of the contingencies that we have experienced in the last year: job loss or declining real estate values. You don't have to give up your dream of owning a home, but you do need to ensure that your dream does not turn into a nightmare.

To view the new financial realities series, please visit

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About CFP Board:

The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for personal financial planning. The Board of Directors, in furthering CFP Board's mission, acts on behalf of the public, CFP® certificants and other stakeholders. CFP Board owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements. CFP Board currently authorizes more than 60,000 individuals to use these marks in the United States. For more about CFP Board, visit

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