The Pros and Cons of Renting or Buying


In the eyes of many, owning or buying a home is a measure of success. But for others, it is not a good move. It will all depend on certain circumstances, your own circumstances. So what exactly can help make you decide? Here are the pros and cons of both sides.

In favor of buying:

  • After paying off your home, it's all yours. The expense of housing is eliminated.
  • Tax credits help balance some of the costs of homeownership.
  • If the property appreciates more than what you have paid in mortgage, taxes, interest, and maintenance over time, you will either break even or earned a return.
  • You can do whatever you want to your house. Add-on to it, paint it, install solar panels, and more.

In favor of renting:

  • When you rent, it isn’t throwing money away, it's getting a place to live in.
  • If you own the house, you will pay quite a bit in taxes and interest.
  • You won’t have to pay for maintenance, repairs, or any other issue that come up.
  • Buying a house has an opportunity cost, that is the cost you may invest and earn on the insurance payments, down payment, taxes, and interest.

While all of these are valid points, you must consider individual factors as well. It will come down to crunching some numbers, maybe altering the way you think about protecting your finances and homeownership.

Individual Factors

  • The housing cost in your location
    • In most situations, people rent because owning a house is just too expensive. However, it depends on your area's market. If renting is very costly in your area, then it might be more affordable to purchase a home.
  • How long will you live in the home
    • This changes depending on the market, but generally, the longer you stay in the house, the better because the costs of owning it are spread out over time.
  • Opportunity cost of the down payment
    • If you invest that lump sum, how much return will you get?
  • The opportunity cost of your taxes and insurance
    • What are the kinds of long-term return you could get if you invest the money instead? Like a Certificate of deposit, the stock market, or even a savings account with “high interest”?

It’s almost impossible to say whether buying or renting is a better decision because it depends on your unique situation. You will have to consider where you are living, the kind of house or property you’re looking for, how much you are going to pay in the future, how much you will pay in rent... and the list goes on.

So what is the bottom line? Sometimes it is smarter to rent, and there are times when buying a home can work in your favor. Don't just give in to one side, it will be more helpful if you learn all the rules, crunch the numbers. After that, you can do which one works and what feels right for you.