Should I Rent or Buy a Home?

by Scott Jensen, Financial Planning Consultant with COUNTRY Financial

Owning or renting a home each have their own unique benefits. You may have heard people say, “renting is just throwing money away. You should always buy instead.” It seems like sound advice, but is it really? It all depends on your financial goals and circumstances.

Benefits of owning a home

Equity and appreciation

Once the mortgage is paid off, you have more free cash flow each month and, as a homeowner, you get to reap the profits from potential appreciation in your home’s value.

Tax benefits

If you itemize your deductions, the government helps pay some of the financing cost through lower taxes (though this impact may be limited with the larger standard deduction).

Financial stability

Your monthly mortgage will stay the same; rent can increase. 

Freedom to make your house a home

When you own the home, you can choose how to decorate, upgrade and furnish it.

Before buying a home, consider the full cost such as taxes, home insurance, and regular maintenance and repairs. Our home affordability calculator can help you determine how much you can afford to spend on a home. 

Benefits of renting a home

Flexibility

Renting gives you options, like moving more quickly and often than you can if you own a home. 

Limited financial responsibility

You’re not the landlord. You don’t have to pay for property taxes, repairs, maintenance, or other issues that come up. 

Lower upfront costs

You also have lower upfront costs such as a deposit and first and last month’s rent, which are typically much less than a down payment on a home loan. 

If you’re considering renting a home, don’t forget to talk to your insurance agent about renters’ insurance. 

Additional considerations

Choosing homeownership vs renting can also depend on where you live. Some markets are prime places for buyers and others for renters. You also need to understand factors like:

• How long will you be in the area?
• Do you have pets? 
• Will the down payment negatively impact your retirement and emergency funding goals?
• Are you getting yourself in over your head with a fixer-upper?

The bottom line

Sometimes it’s smarter to rent a home, and sometimes buying is the right answer.  Rather than holding to one view or the other, make your decision based on the economic factors of your specific situation and your personal lifestyle preferences.

Updated 5-30-23