Ok, to buy or not to buy, that is the question.
This bastardized version of a famous, if not overly quoted, Shakespearean line (in fact I don’t even know which play it’s from – I’m that shallow) is a question many medical students face at one time or another during their education and training. Even before medical school begins there are corporations and entities out there trying to obtain signatures from the would-be doctor, playing the hand of a stable 4 years, good investment, and why throw you’re money away? I’ve heard ‘em and don’t buy ‘em. Here’s why.
As a medical student, I must ask, why on earth are you buying a home? Unless your spouse or significant other is the one making the purchase and has the money to cover the mortgage without getting you into significant financial distress, you shouldn’t borrow money with borrowed money. Plain and simple. It’s like paying off a credit card with loans – we do it, but it doesn’t make a great deal of sense, does it?
4 years of medical school sans PhD or other pursuits, is obviously not enough time to obtain a good amount of equity in a home to ensure you won’t owe once you sell. Trusting that you can stay in the area and do a residency? Don’t – it’s hard as hell to do and unless you’ve got some serious cajones and won't interview anywhere else you probably will have to move. Getting a job is great, but worrying about selling your home before you can move can cause a lot of stress at a time when you should be celebrating. Let’s not even consider that you’re responsible for taxes, upkeep, insurance, etc. etc. etc. with owning a home that won’t affect the selling price or value.
As a resident you’ll find there are more people trying to get you to buy a home. After all, you’re finally making some BIG money (which is almost anything since you’ve been unemployed for 4 years!) and you’re a doctor. Treat yourself good. But that’s the trick– assuming you should have something when, really, you’re in the same boat you were during medical school.
Look, most residencies are 3-5 years. Because you’ve likely not been able to save a tremendous amount many residents obtain 100%, nothing down loans covering the cost of everything. Any fee that comes about from the purchase of the home will go into this loan. Now, once signed, the purchased home is now more expensive than what they bought it for. 3-5 years is not a lot of time to pay off that extra money that was accrued, gain equity, and be able to sell the home once residency is completed. You’ll most likely owe and have to write out a check just to be clear of “your home”. Plus your loans are only deferrable for certain period of time and they’ll be coming due at the time or before you finish residency - leaving you owing essentially two mortgages.
And let’s not kid ourselves, many of us believe we’ll be attendings in the area we did residency, at least for a few years while we stabilize. Can we guarantee it? Can we be sure that we’ll be offered jobs by the hospitals or groups in the area? No, we can’t. Once again you’re assuming something that you can’t control. Having a house that you can’t sell, that limits your ability to accept offers in other states or cities, and that now controls what you can and can’t do will make you miserable.
Plus the obvious factor coming into play is the status of economy. 3 or 4 years ago the housing market was doing well - now people can't sell to save their lives. Do you want to risk that?
To further explore the benefits of delaying instant gratification, let's consider what renting could offer. Are you throwing money out the door when you rent? Well, for the insurance, taxes, upkeep, housing association fees, utilities, etc. that come with home ownership you can see how, after 4 years, renters are more likely to come out on top. They’ve not been forced to pay for appliances that break, broken water heaters, home owner’s insurance and possibly mortgage insurance. Every increase in property taxes doesn’t instantly affect them or -god forbid - having entered into a variable rate mortgage, every swing of the interest pendulum won’t suddenly double or triple their monthly payment.
Instead they pay their rent, utilities, renter’s insurance and not much else. Something breaks? Call the landlord. Broken water main? That sucks, but they aren’t paying. Appliances? Unless you’re a shmuck and rent a home where you have to provide the fridge, stove, and dishwasher you’re not paying to replace these or fix them either. An increase in rent can occur, but you’re not stuck having to pay something that you don’t accept. Once your contract is over you can move to a cheaper place if the monthly payments become too much – you aren’t suddenly crippled if the landlord wants another $500 each month.
And if you’re considering the tax deduction that comes with a home – the savings overall per year from a renter are often similar, if not more than those deductions even with a higher monthly payment.
Sure there’s the pride of ownership, but it can wait. It’s just not worth it to get in over your head simply because of pressure to fit a persona, a lifestyle, that you can’t meet anyway. Yes you’re a doctor, but you’re really not - so don't behave like you're set and secure. You’re still a student and it would be wise to think that way.