The choice between buying a home and renting one is among the biggest financial decisions that many adults make. But the costs of buying are more varied and complicated than for renting, making it hard to tell which is a better deal. To help you answer this question, our calculator takes the most important costs associated with buying a house and computes the equivalent monthly rent.
Aside from your personal situation, there are some objective benefits and drawbacks to renting and buying that will exist in most scenarios.
Mobility/ freedom to move around Landlord pays for maintenance
Doesn't require expensive closing costs No fluctuation in monthly housing expenses
Allows you to test-drive different living spaces
You don't build any equity Limited ability to customize your living space
Rent could go up over time Landlord might sell or decide to stop renting
Limited sense of home stability/ permanence
You build equity over time Home value may increase over time You may reap tax benefits
Unlimited freedom to customize your living space Sense of home stability/ permanence
Closing costs can be prohibitive
Responsibility for maintenance and repairs which requires time and effort
Less flexibility to move (at greater difficulty/ expense) Home value may decrease
Recent tax laws could hamper tax benefits
Whether you would save more by renting or buying can depend on a few key factors. One is your location and the prices of other homes or rentals in your area. Next you need to consider your credit score and if a lender would find you creditworthy. After factoring in a home's purchase price, down payment and closing costs, as well as a monthly mortgage cost, compare that to the monthly cost of rent and subsequent assumed costs over a period of time. You'll be able to see the differences between costs as well as the perceived equity you would've built up in a home.
There isn't always a clear answer to the question of whether to rent or buy. Depending on your life situation and finances, the answer might change over time. There are other options, such as rent-to-own property, where you start out renting then move onto becoming a homeowner. No matter what decision you make, it's crucial that it's an informed one based on your financial situation and lifestyle.