Given my financial situation, is it better for me to buy a house or continue to rent?
I am 55 years old. I am currently working and I have three young kids. I have close to $180k in cash savings, $167k in a 401(k) and $40k in a 529 plan. I also have an $18k car loan. Would it be better for me to buy a house or stay in the apartment I am currently renting?
You don't state your salary or your expected living needs once the kids are grown and gone. But given what you have told us, it's clear that you are not even close to having enough to retire on. You need roughly 20 times your annual living needs, after deducting any steady income (such as Social Security or a defined-benefit pension). So don't start feeling flush and overextend yourself. You should probably be putting (or trying to put) 20% of your gross salary away into savings every year. This number inclludes all savings types. If you put a payment down on a house and take on a big mortgage you will most likely be unable to retire comfortably. Don't fall into the trap of thinking that your house is a vehicle to build savings. Too many people find themselves "house-poor" in old age and unlocking your home equity can be expensive or disruptive.
It is wise for you to look at your financial situation in trying to find out if you can afford to buy a home. At first glance, it seems like you have plenty of savings and are able to save from the income you are making. However, there is a lot of information missing:
1) How were you able to accumulate these funds? Did your cash savings come from inheriting money or from earned income saved?
2) Where do you live? How much is a home that you would like to purchase around you?
3) You also need to find out if home ownership is for you. Some people do not really want to own, and that's okay. There are a lot of responsibilities that come from purchasing a home, and having someone do all of these things for you might not make financial sense.
Home ownership is a great way to help you grow wealth. You could use some of your cash savings for a down deposit and I would recommend that your home expenses (mortgage, real estate tax & insurance) are about 25% of your net income combined (or less). I also recommend that you use a 15 or 20-year mortgage. This should help you build equity faster.
There are a lot more to look into before you make you decision than what you shared with us. But it seems like it would be a good idea for you.
I hope this helps.
Generally speaking, it is better to buy a home than it is to rent. The odds are you will be spending about the same every month, and in return, you will own a home that will provide you equity in the future if you need it.
Owning is better than renting over the long run because if fixes your housing costs. Unlike rent, your mortgage payment does not go up every year, and each passing year sees more of the mortgage being paid back to you in the form of increasing equity. However, not everyone is prepared to buy a home. It appears you have the funds for downpayment, so that is no problem. What we don't know is your income and credit standing. Given your age and the fact that you also need to also be saving aggressively for retirement (15-20% of income), I would encourage you to keep home purchase to what you can afford using a 15 year mortgage, with payment no more than about 20% of your income. (that said, if you are already paying more than this in rent, it might be ok to go up to 25%). Finding a CFP or financial coach to help with the decision might be a good investment.