is it better to buy or rent your home?

The right answer depends on what's important to you

Whether you’re making mortgage payments or sending monthly checks to a landlord, housing is likely one of your biggest expenses—and you may wonder if your current arrangement is really best for your financial goals. If you’re considering whether to rent or buy your next home, keep in mind that either option can be the right one, depending on your circumstances.

The truth is there are advantages and disadvantages to both owning a home and to renting one. Let’s take a look at some of the reasons you might want to buy or rent.

Benefits of buying

Building equity. A monthly rent payment goes to your landlord, so once you pay it, it’s gone for good. A monthly mortgage payment, on the other hand, helps you build equity in your home. Home equity is the share of the home you own. Your equity increases as you make mortgage payments, and it can also increase as your home appreciates in value. Home equity is an asset that increases your net worth and can be used toward the purchase of your next home. Once you have enough equity, you can also take out a home equity line of credit, also known as a HELOC, which gives you access to the value of your home for renovations or other uses.

You make the rules. When you own your home, you have no landlord or property manager to answer to. That means you can own pets, make repairs, tear up the lawn, or even install a pool (remember – if you have a homeowners association, or HOA, check with them first!). When it comes to decisions related to the property, you have the freedom to do as you please.

Predictable payments. While it may take many years to pay off, a fixed-rate mortgage gives you a set monthly cost, so you don’t have to worry about your housing costs going up without warning.

Benefits of renting

Fewer home maintenance costs. As a renter, there are a lot of maintenance and repair costs that you don’t have to worry about. When the roof leaks or the water heater breaks, for example, the cost is typically covered by the property owner. Property taxes also fall to the owner instead of the renter, although they may be passed on to you through rent increases.

No down payment. While you may have to pay a security deposit (often equal to one month’s rent) when you rent, that’s generally way less than what buyers put down when they purchase a house—typically up to 20% of the total cost of the home. So, for a $200,000 home, buyers may choose to make a down payment of $40,000. Some home loans, however, require a smaller down payment.

You can move more easily. Renting often makes sense if you’re living somewhere short-term. Most rental leases run for 12 months or less, and after that you can move on without the task of selling your home. And if you’re moving to a new city or state, renting for a while gives you a chance to get to know the area before committing to buying a home in a new place.

When it comes to buying versus renting, neither choice is right or wrong. The best option depends on your overall financial picture, your goals for the future and the stage of life you’re in right now. If you’re interested in learning more about buying a home, meet with one of our mortgage loan officers to explore your options.