Is it better to rent or buy a home?

By RealtyCrunch IncApril, 26th 2020
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Is it better to rent or buy a home?

Whether it's better to rent or buy a home or apartment is part art and part science. With a few realistic assumptions about rent and housing appreciation, you can figure out whether it is more economical to rent or buy. But even if it hands down in favor of one or the other, preferences and life circumstances, ie the art, will often play a role too.

Use the rent vs buy calculator at the end of this article to find out what is more economical for you.

Pros and cons of buying a home:


Pros:

  • Fixed costs: with a fixed rate mortgage, you will have a predictable payment for the life of your loan, that won't inflate over time
  • Tax deductions: home buyers receive tax deductions for property taxes and mortgage interest, helping to offset some of the costs of ownership
  • Equity and appreciation: each payment you make, builds equity in an asset that historically has appreciated 1% each year
  • Stability: If you know you want to stay in your neighborhood for decades, owning a home helps to plant roots and provides stability
  • Security: Having a paid off home by the time you retire will drastically reduce your ongoing living expenses
  • Personalization: when you own a home, you can make it your own from landscaping, paint colors, inbuilt shelving to full renovations and updates.
  • Low volatility: unlike investments in the stock market and other assets, the value of your home will not change from moment to moment with each trade.

Cons:

  • Ongoing expenses: home ownership comes with many ongoing expenses that are often out of your control, including: property taxes, homeowners insurance, repairs and maintenance, utilities, pest control, tree trimming, etc.
  • Not liquid: while your home may appreciate over time and you continue to build equity with each mortgage payment, if you need access to cash for an unforeseen expenses, or if you fall on hard times, it can take months to sell your home to access the value
  • Lack of diversification: for most of us, a home is our largest expense, so even though we can build equity over time, it is a poorly diversified investment

The pros and cons of renting a home:

Pros:

  • Flexibility: Renting provides the freedom to pick up and move to a new neighborhood or city as needed
  • Right Size: renting allows you to have a home that is the right size for your family whether it is growing or fleeing the coup  
  • Predictability: your rent payment is fixed for the term of your lease and you don't have to worry about unexpected repairs that can be quite costly, like a new roof or sewer line
  • Diversification: when you have savings to invest, you can better diversify your investments

Cons:

  • Rent increases: your landlord can try to increase the rent at the end of each lease term vs a fixed rate mortgage which will never increase.
  • Instability: your landlord can increase your rent with each renewal, choose not to renew your lease and force you to move, or not upkeep the home to your standards
  • Low Customization: as a renter, your home is your landlord's business and you will have little ability to customize and upgrade your home


After weighing all the pros and cons, you might be leaning one way or another. Check out this rent vs buy calculator to get the hard numbers of what makes the most sense in your case.

Rent vs buy calculator

We find the NewYork Times rent vs buy calculator a great start to your decision

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html