The buying vs. renting debate has been going on for a long time. In recent years, however, we have gained access to more data to support one side or the other, meaning more facts and less conjecture. Although every real estate decision comes with some degree of risk attached, this solid data can give you more confidence in the route you choose.
One fact the data has shown is that buying is the better long-term option, assuming that buyers stay in their homes for seven years, put 20 percent down, and have a 30-year fixed rate mortgage.
Renting is better than buying if…
- You want to “try out” a city or neighborhood. Maybe you’re unfamiliar with the city you’re moving to and want to get a better feel for it before committing to buying a home. In this case, renting makes perfect sense.
- You plan to live in the home for just a few years. If you are moving to another city to work for just a year or two, renting is the better option. Considering the initial costs of home ownership, it will be more expensive for you to buy. Renting = short term; buying = long term.
- You live in a very expensive city. According to Forbes, there are 16 cities in the U.S. where renting is cheaper than buying. The top five: San Francisco, San Jose, and San Diego, California; Seattle, Washington; and Portland, Oregon.
- You do not have a stable or growing income. If you do not have a stable income, it may be difficult to secure a loan with good rates, which could make homeownership more expensive for you in the long run.
- You cannot afford a down payment, have very poor credit, or have high debt. These factors also greatly influence your interest rates. If any of these are an issue for you, you can speak with a mortgage advisor about what you can do to improve your chances of securing good rates.
- You do not want to deal with maintenance. While few homeowners love dealing with maintenance and repairs, most consider it worth the effort. For some people, it genuinely does not suit their personality or lifestyle, and maintenance is better left to someone else (like a landlord).
Buying is better than renting if…
- You plan to stay in one house for several years. Buying a home is an investment. In most places, buying costs less than renting only after a few years due to the initial costs of ownership. If you fall in love with a house and want to stay there for a while, home ownership is the better option.
- You love a particular city or neighborhood. Even if a city or neighborhood is on the expensive side, buying a home will usually cost less than renting. Buying a home isn’t just an investment in your future, it is also an investment in a community. If you love a place and want to be part of its growth and development, buying a home is the way to go.
- You want stable housing costs. Assuming you have a fixed rate mortgage, your housing costs will be the same month after month, year after year. Anyone who loves stability and planning will gravitate toward buying a house.
- You want to build equity. Equity is the money you receive after paying off a mortgage when you sell the home. Co-founder of AE Wealth Management and self-made millionaire David Bach states that “buying a home is the escalator to wealth in America. Homeowners are worth forty times more than renters.”
- You want to claim deductions for mortgage interest and property taxes on your tax returns. While not everyone will greatly benefit from these deductions (due to recent changes in the federal tax law), there are a number of potential homeowners who will. To determine your savings, check out Bankrate’s Mortgage Tax Deduction Calculator.
- You want your home to be truly yours. When it comes to customizing and decorating your home (inside and out), you’ll have a lot more creative liberty if you own.
Buying a home is a major financial commitment and a rite of passage for many people. It’s a symbol of success, as well as a path to financial security. If you’re in it for the long haul, buying is definitely the way to go.
Ready to start house shopping? Start your search online at NewHomeSource.com.
For the last 16 years, Rachel Kinbar has been a writer of articles, blog posts, white papers, essays, infographics, web copy, sales copy, scripts, poetry, lyrics, and more. She has keen research skills that she applies to a wide variety of topics, and she especially loves topics related to design, history, and sustainable living.