Are you deciding between renting or buying a house? Maybe you’re ready to move out of your rental and into your own home. Or perhaps you’re relocating to a new city and contemplating whether to rent a home before making the leap to homeownership. Whatever your reasons, take a moment to consider how renting vs. buying a home will affect your life now and in the future.
Should I rent or buy a house? 3 questions to ask yourself
Each of us has a unique lifestyle, financial situation, and set of long-term life goals that impacts our decision whether to rent or buy a house. To sort this all out for yourself, consider three main questions.
1) Does renting or buying work with your timeline?
One of the most important questions to consider when deciding between renting versus buying a home is your timeline. For example, if you’ve just moved to a city, expect a job change soon, or don’t plan to stay in the community long, it may make more sense to rent. Selling a home costs money, and if you sell too soon after buying, it may not be worth it.
On the other hand, if you've found a community where you'd like to put down roots, buying may be the better option. Owning a home offers more stability and potentially more financial benefits for homebuyers who plan to live in an area for more than just a few years.
2) How much can you afford?
Buying and renting each have their own costs to consider - and this can make the difference between becoming a renter or a homeowner. To buy, you'll need enough money in the bank to afford a down payment and closing costs. How much that will be depends on your home loan, your lender, housing market, and more. Many buyers put down as little as 3%, though a larger down payment will usually save you money on interest and mortgage insurance.
There are also ongoing costs of owning a home—mortgage payments, maintenance, utilities, and different types of homeowners insurance. Learn more about what it costs to buy a house or use a mortgage calculator to get an idea of what you can afford.
If buying a home would take all your savings or stretch your monthly budget, it may make sense to keep renting for now. To rent, you typically just need to fill out a rental application, an application fee, a security deposit, and first and last month’s rent. Deciding to rent can also give you time to raise your credit score, potentially saving you money in mortgage interest and other loan-related costs.
Keep in mind that your monthly rent payment is likely to increase each time your lease is up for renewal. Depending on the housing market, you may end up paying more for rent than for a mortgage payment. A rent vs. buy calculator can help you evaluate which is best for your situation, but remember that it's only a rough estimate.
3) Will renting or buying a home fit your lifestyle?
Renting vs. buying a house is also a lifestyle question. Homeownership is a long-term investment that can enable you to build wealth over time. That means treating your home as an investment and caring for it accordingly, with regular maintenance and repairs. Buying also comes with pride of ownership and the freedom to make decisions about style and upgrades that you typically don't have as a renter. In fact, in some markets buying a home with a yard, garage, or that third bedroom you've been wanting may be more affordable than trying to rent the equivalent property.
On the other hand, you may have good lifestyle reasons to continue renting rather than buying a home. Renting could be preferable if you'd rather not deal with the responsibility of home maintenance and the likelihood of paying for emergency repairs. Maybe a change is on the horizon, like a career transition or a child attending a different school, where renting a home makes more financial sense and aligns better with your long-term goals. Renting may also be a good choice if you have a busy lifestyle, move around a lot, or simply prefer more freedom and aren't ready for a big commitment.