Are You Stuck in the Renter’s Trap?
Are you currently a renter with plans to eventually own a home? If you want to avoid getting stuck in the “renter’s trap” for the foreseeable future, you might want to reevaluate your timeline and plan of action.
As a renter, you find out if you’re at risk for the “renter’s trap” every time you have to renew your lease. The costs of things that your landlord or management company provide has increased and, as a result, your rent needs to increase to continue to cover these costs. Sometimes (depending on where you live) the cost of renting will increase because the market is so strong, which means that management is able to ask for more because if you don’t pay it, someone else will.
While annoying and unfortunate, both of these rent increase reasons make sense and are a part of life as a renter. The problem comes when the cost of everything around you increases while your income remains the same.
The “renter’s trap” occurs when you end up spending the money you’d like to save for a down payment on rent and other expenses, which forces you to continue renting. The result is a diminished savings account and more time than expected spent renting rather than owning.
It sounds like an easy trap to avoid, but due to a lack of knowledge about alternative loan programs, many people think that they have to continue renting because they can’t afford to buy a home. Thankfully, the days of the 20 percent down payment requirement are gone, and there are many loan programs available that let home buyers put considerably less down, depending on a variety of factors, including income, military involvement, whether you’re a first-time home buyer, and the type of home you want to purchase.
What Are the Options?
The first thing you should do is speak with a lender about your financing options. They will be able to look at your unique circumstances and find the right loan program for you.
Another option is to make sure that you leave enough room in your budget to continue putting money into savings. If the costs of rent and utilities increase, then find an area in your life where you can decrease spending to ensure that you’re still contributing the same amount to your down payment fund.
You can also discuss the rent increase with your landlord. Rents increase for many reasons, but if you’re a good tenant, your landlord might be willing to work with you to keep the increases minimal. Unfortunately, they can raise the rent by however much they want (unless you live in a rent-controlled unit), so even if the increase feels exorbitant, you’ll have to pay it if you want to continue renting there.
If you have a steady income and plans to stay in the area for a while, you should look into your options. Don’t get stuck renting for longer than you’d like when you could own your own home today.