When deciding between owning or renting a home, conventional wisdom has long said that buying is the smarter choice: homeowners build equity whereas renters do not. But building equity shouldn't be your only consideration when choosing between owning and renting. Your overall lifestyle and needs are as important, and depending on your circumstances, renting might be the best move for you.
Reasons to buy
- You own your home. When you pay rent, you don't own your apartment, house, condo, etc. As you pay off your mortgage, you have more ownership (or equity) in your home with every payment.
- Tax deductions. You may be able to deduct mortgage interest and property tax payments from your taxes, up to certain limits. There can also be other tax benefits, which a tax professional can help you identify.
- Creative control. Paint the walls, put in new flooring, decorate however you want. It's your house! You call the shots in a home you own, a freedom not often found when you rent.
Reasons to rent
- Find the right place without committing. You can check out new neighborhoods or new towns to find the area you love and want to live in.
- Your career. With many moving to remote work, renters now have the ability to pick and move because they have the ability to work from many different locations.
- Build your credit. If you have bad credit, creating a history of on-time rent payments can help you build your credit.
- No/low maintenance. If you have a plumbing issue or an appliance breaks, renters can simply call the property manager and arrange for repairs.
- Budget-friendly. Often, the landlord pays for many utilities such as water, sewer, trash, etc., which saves you money in your budget each month.
- Homeownership is expensive. You’ll typically need a 20% down payment to avoid paying higher rates and private mortgage insurance (PMI) as well as cover closing costs (generally between 2% and 6% of the loan).
The question of whether to buy or rent is highly personal, so it’s worth weighing the pros and cons of each option. Your financial advisor can help you make the best decision for you and your lifestyle.