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Buying vs. Renting Your Home: Which Is Right for You?

Blue-gray craftsman style house with green grass lawn
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We know we all have to live somewhere, but the question is always, where? City or country? House or condo? And of course, there’s the buying vs. renting debate.

For some past generations, buying a home was a right of passage: It was proof you were grown up. Things are a bit different these days. Housing costs are high, wages struggle to keep up with inflation, and the gig economy means some workers can’t rely on a truly steady paycheck. All that has led to a rise in renting.

Of course, buying is still an option, but there are a ton of factors — like your life stage and geographic location — that go into deciding which choice is best for you. When you prepare to move, it’s perfectly reasonable to ask yourself, “Should I buy or rent?” To help you answer that question, let’s look into some of the pros and cons of each living situation.

Should I buy or rent? Factors to consider

Most adults will ask this question at some point in their lives: Should I rent or buy a house? Of course, there’s no right or wrong answer, but your decision will most likely depend on your situation.

Here are 5 things to consider when deciding if you should buy or rent

Where you live: 

In some markets, house prices are affordable, based on the average income in that area. However, in some big cities and sought-after neighborhoods, even a small bungalow can be unattainable for the average buyer. You have to assess if you can afford a house in your area, and whether housing prices are likely to go up or down over the next while. Do your math to figure out what’s best for you.

How long you plan to live there: 

Buying a house costs more than just the price of the home. The transaction will incur legal fees, mortgage costs, realtor commissions, and more. The first five years or so of your mortgage payments will go more toward interest than the principal on your loan, so it takes some time to realize the benefits of a real estate investment. If you’re thinking you’d like the flexibility of being able to move in the first five years, you may be better off renting a home.

Your income: 

Your earnings will be a factor in whether you can afford to buy a home, and also whether or not you can afford to own one. Finance experts recommend you save at least 1% of the value of the home annually for repairs and improvements. Do you earn enough to pay a mortgage, property taxes, utilities, and also last-minute breakdowns? Experts also suggest you shouldn’t spend more than 60% of your income on essential spending. If buying a house will make you poor in all other areas of your life, it may not be the way to go.

How much you have saved: 

You can borrow a significant amount of the cost of a house, but not all of it. Lenders generally require a 5%-20% down payment on the cost of a home. Having money saved as a down payment is tough for first-time buyers, especially, but it’s favorable because it lowers the full amount of the mortgage left to pay, and shows that you’re in a good financial situation to own a home.

How much the bank will loan you: 

You may know you can afford to pay your mortgage month after month, but you also have to convince your lender. Poor credit history or an unfavorable debt-to-income ratio will limit the size of the risk lenders are willing to take on you. If you don’t have the credit to borrow for a house right now, you may have to build your creditworthiness over the course of a few years.

Understanding the costs of renting vs. buying

Housing represents a considerable amount of your committed spending, whether you buy or rent. Some expenses are upfront, while others present themselves over time. That’s what makes it particularly hard to compare one option to the other. There are some online calculators available to help you wade through the expenses of each. But let’s go over some of the standout costs of renting and owning a home that you may need to consider:

Breaking down buying costs

Buying costs often catch first-time-buyers off-guard, because they’re not always obvious before the process gets started. Of course, most home shoppers are aware that they’ll be required to front some of the costs of the house. But there are some sneaky expenses that all homeowners must be aware of.

Closing costs are charged with the sale of a property, and usually include title fees, surveyor costs, loan processing fees, and insurance costs. Lawyers’ fees to complete and oversee this paperwork are negotiable. Closing fees can range from 2% to 7% of the cost of the home.

Also, be prepared to pay property taxes. Those costs can vary by state and can fluctuate based on the location and value of your home. Don’t get stuck with sticker shock — look up property tax data on your county so you can factor that cost into your budget.

Realtor’s fees will also play into the sale price of the home. While the seller usually pays the tab for both the buyer’s and the seller’s realtors by having it deducted from the final sale price of the house, some sellers may increase the price of the house to reflect this expense. Realtors’ commissions often run around 6% of the sale of a house.

Breaking down rental costs

Renting is expensive, too, although it’s generally cheaper than owning in every state across the U.S. This CNBC article shows that the costs of homeownership are anywhere from $300 to over $1,000 more than renting, depending on where you live and the terms of your lease.

When you rent a home, you may still be responsible for utilities and groundskeeping, depending on your lease agreement with the landlord. You should always carry renters insurance, too, to cover the cost of the items in the home in case of fire or theft.

Remember that when you rent, you may have to move more often, depending on your deal with the property owner. Moving is expensive — in addition to security deposits and rent deposits that new landlords will charge, all your services (including postal services) need to be moved with you. Some companies charge a fee for that service.

Comparing buying vs. renting

The pros and cons of buying


  • An investment that should grow in value over the long run
  • Pride of ownership
  • Control over your space — how long you spend there and how you renovate
  • Builds equity that can allow you financial flexibility in the future
  • When the mortgage is paid off, you no longer have to pay a monthly housing payment


  • Greater upfront costs than renting
  • Less flexibility to relocate quickly
  • Takes up a large part of your investment dollars
  • You’re responsible for fixing and maintaining your home
  • You could lose money in a housing market downturn

The pros and cons of renting


  • It’s easier to rent than to secure a mortgage and buy a home
  • More flexibility to relocate
  • Not responsible for building maintenance and repairs
  • More flexibility in your investments — can seize opportunities as they arise
  • Overall costs are lower than homeownership


  • You don’t build equity over time as you do when you pay off a home
  • It isn’t your property, so you don’t have control to complete changes or renovations
  • You may have to move if the landlord decides to sell or change the property
  • Your monthly payment never goes away
  • Your rent is subject to change every time your lease is renewed

The bottom line

Obviously, there are a lot of considerations when it comes to buying or renting a home. Doing the right thing comes down to what’s right in your individual situation. Do your research to determine the best route for you.

Frequently asked questions

Is renting cheaper than owning a home? 

Upfront and monthly costs for renting a home are less than for buying a home, in all states across the U.S. However, the worth of the home — once it’s owned outright — counterbalances the extra expense.

What are the additional costs associated with owning a home? 

When you own a home, you’ll have to pay property taxes, homeowners insurance, and maintenance and repair costs for the home as they arise.

How much do I need to save to buy a home? 

Most lenders require a down payment of between 5% and 20% of the cost of the home. Closing costs, including lawyers’ fees and realtors’ commissions, will also be incurred, but are sometimes rolled into the mortgage.

What is the difference between being pre-qualified and pre-approved for a mortgage? 

If you’ve been pre-qualified for a mortgage, it means that your banker has taken a surface look at your debt, assets, and income and has given a general idea of how much the bank would likely loan you. A pre-approval is a more in-depth look at your finances, including running a credit check. It amounts to a tentative agreement to actually loan you the money unless big changes occur before the actual purchase date.

How long do I need to be willing to stay in a house I’ve bought? 

Experts generally recommend five years between the time you buy your house until when you sell it. By the time five years pass, you should have built up enough equity in the home to offset closing costs on either end. Before that time, you might actually end up losing money on the deal. Remember, if you’re ready to move before five years is up, you could always consider renting your house to somebody else.