Is it better to rent or buy a home? That’s one of the most common questions people ask about housing.


The answer heavily depends on your finances, priorities, and life goals. Both homeownership and renting have their fair share of benefits and drawbacks, so there’s no definitive answer as to which one is better. It comes down to understanding the pros and cons of each option and assessing your personal situation to determine what makes the most sense for you.


Check out our in-depth guide before you decide between buying vs. renting a home:


Pros and Cons of Buying a Home

Homeownership is a major life decision — and like any important decision, there are both advantages and disadvantages that you’ll need to weigh. Below are some of the biggest pros and cons of buying a house.

Pros of buying and owning a home

You’ll find several good reasons to pursue homeownership. One of the overarching benefits of buying a home is that it’s yours.


“You have control,” says Brian Davis, a real estate investor and co-founder of SparkRental, a property management software company based in Hatboro, Pennsylvania. “You can make any changes you like to your home.”


A notable exception is if you belong to a homeowners association, which may impose certain rules and require you to receive permission to change up your home. Otherwise, the control you have as a homeowner is far greater than that of a renter.


Here are some other advantages to buying a home:


  • Fixed monthly payments: Instead of making rent payments that will likely increase every year, homeowners can lock in their mortgage payments for 10, 15, 20, or even 30 years with a conventional loan.


  • Tax benefits: Homeowners can deduct their mortgage interest and property taxes, which may help raise their itemized deductions above the standard deduction. “Depending on your tax situation, and where you live, you may come out ahead after considering the write-offs that are allowed,” says David Dye, broker and CEO of GoldView Realty, which is located in Torrance, California. “While the monthly mortgage payment when buying might be more expensive, sometimes the tax benefits actually make it the cheaper option overall.”


  • Equity: When you make a mortgage payment each month, you’re reducing the amount that you owe on your home and building equity. “As homeowners build equity in their property, they can later access it a number of ways,” says Ben Dobler, a certified financial planner and founder of Stewardship Financial Counsel, a virtual financial coaching service based in Cincinnati. “For example, using a home equity loan or home equity line of credit (HELOC), cash-out refinance or when the home is sold.”


  • Home value appreciation: Real estate tends to appreciate in value over time for various reasons, but a big one is supply and demand. There are only so many homes available and a limited number that can be built, which often makes housing demand outweigh housing supply. As a result, homes become more valuable over the years, with the exception of events like recessions or natural disasters.


Get Your Answers: 10 Common Questions About Mortgages

Cons of buying and owning a home

Homeownership isn’t all sunshine and rainbows. There are some drawbacks to buying and owning a home, especially when compared to renting.


Here’s a look at several downsides of homeownership:


  • Higher initial costs: Homeowners may pay more than renters in the short term due to closing costs, expensive repair bills, and more. “These can easily add up to thousands of dollars,” Dobler says. “In addition, homeowners need to make a hefty upfront down payment to purchase a home, which is far greater than the required deposit to rent a property.” On that point, an often-repeated rule of thumb is to save 20% of the home price as a down payment.


  • Maintenance: Unlike renters, homeowners typically shoulder the responsibility of maintaining their property. That means getting hit with unexpected repair bills, which can range from unclogging a drain to replacing the entire roof.


  • Property taxes: After purchasing a home, you’ll be required to pay taxes on the value of your property. Property taxes vary considerably across the U.S. in terms of rates and policies. However, no matter where you live, you’ll need to factor property taxes into your budget when you’re planning to buy a home.


  • Homeowners insurance: There’s no legal obligation to pay homeowners insurance, but mortgage lenders will require you to insure your home since they have a financial stake in it. In terms of cost, homeowners insurance rates vary across the U.S. However, areas with higher risk of natural disasters — like tornadoes, earthquakes, or floods — tend to be more expensive.


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Pros and Cons of Renting a Home

Renting has distinct advantages and disadvantages, but how much they matter ultimately depends on your situation and preferences, like if you plan to travel the world soon or if you don’t want to deal with home maintenance. We’ve rounded up some of the major pros and cons of renting below.

Pros of renting a home

As a renter, you bear far less responsibility for your residence, which translates into a number of benefits that homeowners lack.


Here’s a look at some of the main advantages of renting a home:


  • Flexibility: Renters can move anytime they like, and if they happen to be midlease, they can usually work something out with the landlord or find a replacement renter, according to Davis. “In a fast-moving and unpredictable world, that flexibility carries real value,” he says. “Homeowners, in contrast, must pay tens of thousands of dollars and usually many months to market and sell their home.”


  • Streamlined monthly expenses: Renters pay a flat rate each month, and they don’t have to worry about budgeting for additional housing costs beyond utilities and renters insurance. “As a homeowner, there are more taxes you need to pay, as well as unexpected expenses, such as maintenance costs, which can reach significant figures,” says Mihaela Buzec, a real estate writer at RENTCafe, a nationwide apartment listing service based in Santa Barbara, California. “As a renter, these are not your duty.” Naturally, that results in savings — and fewer expenses to keep track of — for renters.


  • Lower upfront costs: Renters need to cover some initial costs when they first move in, such as processing fees, security deposits, and the first and last months’ rent. Afterward, however, the cost to rent is quite stable every month, and these upfront costs are typically much lower than a down payment, according to Buzec.


  • Less risk: As a renter, you don’t take on the risks associated with homeownership, such as foreclosure, downturns in the housing market that could affect your home value, and more. All these risks are borne by the owner of the property, not you, says Chris Gold, a real estate investor and owner of Chris Buys Homes in St. Louis, a homebuying company.

Cons of renting a home

Though it’s a flexible lifestyle, choosing to rent instead of buying results in some drawbacks. You should weigh these disadvantages against the advantages of renting before making a decision.


These are some notable cons of renting:


  • Lack of equity: Renters simply exchange their hard-earned cash for a place to live, but homeowners may simultaneously build their net worth and reside in what amounts to a forced savings account, says Than Merrill, founder and CEO of FortuneBuilders, a real estate education company based in San Diego. As the equity in their home increases, a homeowner can unlock new financial options — like getting a home equity line of credit, or HELOC, to pay for repairs and renovations — that are unavailable to renters.


  • No tax benefits: Unlike mortgage interest and payments, rent cannot be used as a tax deduction, unless the property is part of your home-based business. Homeownership also provides the incentive to itemize your deductions instead of taking the standard deduction, which can result in bigger savings.


  • Less control: Fewer responsibilities can translate to lower costs when you’re a renter, but it also means less control. Your landlord or property management company dictate the rules on your home’s appearance, cleanliness, pet-friendliness, landscaping, renovations, and more. They can also choose not to renew your lease, which means you may be forced to move out before you’re ready to leave the area.


  • No end date to payments: Though it can take decades, a homeowner stops making mortgage payments once they’ve paid off their home loan. As a renter, however, you must pay rent for as long as you need a place to live. You’ll also have to deal with potential rent increases on a regular basis, especially if you reside in a high-demand area.


Learn More: How To Get Help With Your Rent


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Is It Better To Rent or Buy?

Now that you know more about the pros and cons of renting vs. buying a home, you’re ready to do some self-assessment. You should evaluate not only your finances, but also your personal circumstances and goals.


“This is where your life plan comes into the picture,” says Brady Grohne, owner of Brady Buys Houses, a real estate investment company based in Idaho Falls, Idaho.


Some example questions you could ask yourself include:

  • Are you in college or graduate school and not sure what’s next?
  • Are you actively looking for a new job that may require you to move?
  • Are you in a stable job you love with good prospects for advancement?
  • Are you thinking about getting married?
  • Are you planning to settle down in the area for the long term?
  • Are you already settled? Do you have kids in school?


Your outlook for the coming years greatly affects whether you should rent or buy a home. If you aren’t sure about your next move, are looking for a career change, or plan to explore living in another city, then it might not be the right time to buy a home. Plus, while homebuying is a long and costly process, so is trying to sell the home once you want to leave.


“This is because real estate comes with high transaction costs and is generally illiquid,” Grohne says. “When purchasing and then selling a home off of the multiple listing service (MLS) with a realtor, and with a home mortgage from a bank, buyers can expect to pay over 10% in transaction costs between purchase closing costs, home mortgage points and fees, and sales closing costs and commissions.”


So, renting can be a financially savvy choice for people who anticipate their situation changing in the near future. Whether it’s graduating from college, searching for a new job, finalizing a divorce, or many other life changes, renting gives you greater flexibility than homeownership.


That’s not to say owning a home doesn’t come with plenty of benefits. However, it also entails greater responsibility — and not just in a financial sense.


“Real estate is a long-term investment that requires continual maintenance in order to hold or increase in value,” says Jeff Checko, a real estate broker at The Ashton Real Estate Group of Re/Max Advantage in Nashville, Tennessee. “A buyer needs to be sure they want the potential benefits of homeownership badly enough to justify the disadvantages without running into buyer’s remorse.”


True Story: The $32K Homeowner Mistakes I’ll Never Make Again


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Buying vs. Renting a Home in the US

Rent and home prices vary significantly from city to city. Since homeowners need to pay home insurance and property taxes on top of their mortgage principal and interest, it’s cheaper to rent than own a home in most U.S. cities.
However, in some places, the difference between the average rent and the average home cost is minimal. If you can get your monthly mortgage, property tax, and homeowners insurance payments close to the cost of rent in your city, then buying a home might make sense financially.


Using July 2020 housing data from Zillow, we analyzed the 10 largest metro areas in the U.S. for median monthly rent and median monthly mortgage. The latter is based on Zillow’s median listing price for all homes; a 30-year fixed mortgage rate of 3.07%, based on Freddie Mac’s average for July 2, sourced from the Federal Reserve Bank of St. Louis; a 20% down payment; and local average property tax rates.


Here’s a look at the costs of buying vs. renting a home across America:


City Median Listing Price County Property Tax Rate Monthly Mortgage Payment Monthly Rent
New York $607,773 0.90% $2,737 $2,645
Los Angeles $918,333 0.76% $3,916 $2,511
Chicago $343,300 2.12% $1,987 $1,754
Dallas $355,333 1.99% $2,012 $1,556
Philadelphia $333,263 0.98% $1,620 $1,573
Houston $332,283 2.09% $1,922 $1,480
Washington, D.C. $543,300 0.55% $2,308 $2,083
Miami $397,960 1.04% $1,912 $1,927
Atlanta $344,036 1.03% $1,678 $1,553
Boston $639,265 0.80% $2,817 $2,596

It’s much cheaper to rent than buy in a city like Los Angeles, where the average mortgage payment is $3,916 (including property taxes and insurance), versus an average rent of $2,511. Cities like Miami, on the other hand, reveal a buyer-friendly situation: The average mortgage payment is slightly cheaper than the average rent, by $15.


Keep in mind that property taxes can also be a big cost factor. For instance, both Chicago and Houston have median home prices under $350,000; however, high property tax rates drive up the monthly costs of homeownership considerably.


Read More: Our First-Time Homebuyer Guide


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The Bottom Line

Renting and owning a home both come with their own positives and negatives. While renting is typically cheaper and results in more flexibility, you don’t get to enjoy as much control over your residence. You also won’t reap the benefits of home equity and price appreciation. In the end, your decision to buy or rent should come down to the most practical combination of your location, financial circumstances, and life goals.


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