As the cost of homeownership and rents increase, many Americans ask themselves whether it makes more sense to rent or buy a house. Both renting and buying offer distinct advantages and disadvantages; the best choice ultimately depends on your circumstances. Here are some pointers to help you make your decision:
Renting
Renting allows for greater flexibility, requires a smaller upfront investment, and typically remains constant throughout your lease term. These benefits are significant to individuals who are unsure where to put down roots or anticipate needing to move for work or other reasons because renting gives you the freedom to do so without being tied to a property. Generally speaking, the benefits of renting things benefit young adults or those still building their savings.
Buying
One of the most significant advantages of buying a home is building equity through appreciation and paying your mortgage—both activities can increase your home equity. In addition, homeownership can provide a sense of stability and control.
Financial Considerations
The costs of renting and buying are different.
- Down Payment/Deposit. The deposit on a lease can be significantly lower than the down payment requirement on a house.
- Closing Costs. Closing costs (loan origination fees, appraisal fees, title insurance, etc.) can also be pretty costly when you buy. Renting doesn’t typically have many, if any, closing costs.
- Maintenance Costs. Most leases require the landlord to pay for more extensive repairs. When you own your home, the costs are yours to pay—some costs are quite expensive.
- Taxes and Insurance. Property taxes and homeowner’s insurance are additional costs of ownership.
Conclusion
There’s no one-size-fits-all answer to the rent vs. buy debate. Consider your financial situation, lifestyle goals, and future plans.
- Do you plan to stay in one place for five years or more?
- Are you comfortable with the responsibility of homeownership?
- Do you have a steady income and a good credit score?
Lastly, consider using a rent vs. buy calculator to help you make an informed decision. Then, make the decision that best fits your goals.
