Should You Rent or Buy a House?

two people relaxing on a sofa

Is it better to rent or to buy a home? It’s a tough decision and one that requires careful thought. About 64% of American adults own their own homes, according to a 2019 Statista report,[i] while the remaining 36% rent, notes Pew Research Center.[ii] While more people lean toward buying a home, research shows rental rates are at a 50-year high.[iii]

When it comes to renting vs buying a house, what’s best for you? To help, let’s explore the pros and cons of each choice.

The pros and cons of renting a home

If you’re thinking about renting a home, here are advantages and disadvantages to consider:

Pros of renting a home

  • Move with greater ease. Renting gives you the power to move around more easily because you don’t have to go through the process of selling your home and waiting for potential buyers. Maybe relocation is an integral part of your job. Maybe you aren’t sure which neighborhood you want to live in long-term. Either way, renting gives you the flexibility to move easily — once your lease is up, of course.
  • No home repairs. When you rent, you don’t have to worry about the costs of home repairs. If a pipe bursts, the roof leaks, or the central air breaks, you likely won’t need to pay a thing so long as you didn’t cause the damage.[iv] The property owner is responsible for the upkeep of the home and all repair costs.
  • Fixed monthly expenses. Your monthly expenses are fairly fixed. You pay rent, utilities, and renter’s insurance, but unlike a homeowner, you won’t be hit with an unexpected $10,000 roof repair.
  • Limited maintenance. In the rent vs buy debate, renters also win when it comes to maintenance. Why? Most maintenance is the landlord’s responsibility, depending on what’s in your lease. For example, you might need to maintain the lawn but not have to stain the deck, seal the driveway, or paint the house’s trim.

Cons of renting a home

  • Being asked to leave. The owner or landlord can dictate how long you’re able to stay in your rental home. If the owner decides to sell the home to a developer, for example, you’ll be asked to leave.
  • Rent increases. With each lease renewal, your rent could increase. Rental rates are set by the owner, and sometimes they aren’t less than a mortgage payment for a similar property. A large rental increase could mean the home that was once affordable is no longer within your budget.
  • Restricted ability to make changes. Aside from decorating a rental home, making more significant cosmetic changes, such as painting, or putting in carpet, may be forbidden in the lease. If your daughter wants purple walls or you’d like two sinks in the master bathroom, you’ll have to check the lease or come to an agreement with the landlord.

The pros and cons of buying a house

If you’re leaning toward buying a home, here are advantages and disadvantages to keep in mind:

Pros of buying a house

  • Build equity. Many people lean toward buying a home because it’s an investment. The monthly mortgage you pay offers a way to build equity. When your home’s value is higher than what you owe, the difference is your equity. You can turn that equity into cash if you sell the home or refinance it.
  • Stability. When you buy a home, you “put down roots.” A home can be a place to raise a family, become part of the neighborhood, and take pride in ownership. In short, a home provides a stable place to live and grow.
  • Design to your taste. If your dream home has three bedrooms, granite countertops in the kitchen, a veranda, and a three-stall garage, renting vs buying a home isn’t much of a debate. If you want to update your home and control the look and feel of it at any time, buying is the way to go.

Cons of buying a house

  • The buying processes. The process to buy a home is substantial. Besides touring around to find the right home, getting approved for a loan requires a credit check and extensive paperwork. You’ll also learn about home inspections, earnest money and other “hidden costs” that accompany homebuying.
  • Additional expenses. When you own a home, you’ll have traditional bills like your mortgage, utilities, property taxes and homeowner’s insurance, but you might also need additional services like pest control, tree trimming, and trash collection. It’s wise to have some money saved up in reserve to cover unexpected repairs and maintenance, like a leaking roof, or broken appliances.
  • Fluctuating housing market. When you own, the value of your home is largely dependent on the market. Hopefully, the value of your home appreciates over time, but that’s not always the case. A home’s value can decrease for a lot of reasons, such as an economic recession or a declining neighborhood. If home values drop, you could lose money on your investment.

Deciding whether to rent or buy a home is a complex question. The pros and cons above provide a starting point as you begin weighing your options. If you’ve never purchased a home before, check out these home buying tips as you start building your plan.

 

[i] “Homeownership rate in the U.S. from 1990 to 2018,” Statista.

https://www.statista.com/statistics/184902/homeownership-rate-in-the-us-since-2003/

[ii] “More U.S. households renting than at any point in 50 years,” Pew Research Center (July 19, 2017).

https://www.pewresearch.org/fact-tank/2017/07/19/more-u-s-households-are-renting-than-at-any-point-in-50-years/

[iii] “More U.S. households renting than at any point in 50 years,” Pew Research Center (July 19, 2017).

https://www.pewresearch.org/fact-tank/2017/07/19/more-u-s-households-are-renting-than-at-any-point-in-50-years/

“Renting vs Owning a Home: What’s the Difference?” Investopedia (April 20, 2019).

https://www.investopedia.com/articles/personal-finance/083115/renting-vs-owning-home-pros-and-cons.asp

“Renting vs Buying a House: How to Make a Decision,” MoneyCrashers.

[iv] https://www.nolo.com/legal-encyclopedia/is-the-landlord-responsible-appliance-repair.html