Are you a renter thinking about taking the leap into homeownership, but have doubts? If so, you are not alone. More U.S. households are renting today than at any point in the last 50 years, according to a Pew Research Center analysis.
Fans of owning are still in the majority, however, and that group is strengthening, with homeownership currently hovering near 64 percent — its highest level since 2014 — according to the U.S. Census Bureau.
While renting and purchasing both have numerous benefits, only you can decide what’s best for you—and when. The right decision depends on your unique financial circumstances, lifestyle preferences, and future plans and goals.
Carefully consider the following benefits of each to help you make a decision that is truly best for you.
Benefits of Homeownership
- Making payments toward a home builds equity, which is the home’s value minus mortgage debt. Your equity grows as home prices rise and as you pay down your mortgage.
- You have full autonomy to make your home the way you want it, from paint color to type of flooring to renovations.
- When you buy a home, you invest in community and surround yourself with neighbors who share your same commitment.
- You benefit from rising home values in thriving communities.
Benefits of Renting
- In avoiding the expense of a large down payment and other additional costs associated with homeownership, you have the flexibility to invest, save or spend elsewhere.
- You avoid the upkeep and maintenance associated with owning a home. If the HVAC unit breaks or the roof needs to be replaced, someone else is responsible.
- You have the flexibility to up and move when a need arises, such as a career change.
- You are protected in the event of falling home prices.
- You often have access to amenities such as a pool and fitness center.
Other things to consider:
- The time you plan to live in your house. It’s recommended that you stay put for three to five years on average in order to see a return on the expenses you paid out for things like mortgage fees and agent commissions.
- Your finances. Can you qualify for a mortgage and do you have enough money for a down payment, as well as other fees such as closing costs and a home inspection? Check out comparison calculators, such as Trulia’s Rent vs. Buy calculator.
- Hidden costs for renting and buying. For renters, the cost is the lack of home equity and the inability to claim housing-related tax breaks. For homeowners, you have homeowners insurance (which is substantially more than renter’s insurance), private mortgage insurance, property taxes and maintenance.
Your needs are going to change, especially if you are in your 20s and 30s. Your decision to buy or rent may be influenced by career changes, marriage, having children, taking care of aging parents, your finances, and even hobbies such as extensive travel. It’s important to educate yourself on the emotional and financial ramifications of each, and then proceed wisely.