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Is It Better to Rent or Buy Your Home? The Answer May Surprise You

A realtor handing a set of house keys to a smiling man and woman.

Image source: Getty Images

We’ve all been taught that a big part of the “American Dream” is to own a home, and for many people, it makes a lot of sense. Homeownership builds equity, creates stability, and allows you to build your credit by having and paying off a home loan.

But note that I said that it is right for “many people,” not “all people.” There are certainly times when owning your own home may not be the best choice. Depending on your financial situation, lifestyle, and goals, renting can often be the better option.

So let’s explore both sides and see why the answer to this age-old debate is, surprisingly, “it depends.”

When buying is the better choice

Buying a home can be a powerful way to build wealth and create stability over time. Here’s when it makes a lot of sense.

You want stability

If you plan on staying put for a considerable length of time, say, for at least several years, then buying a home can be smart. As long as you are living in the same place, the stability and independence of homeownership is usually a solid decision.

You want an investment

On the same note, if you plan on staying in a residence for several years, buying a home can also be a smart investment. Over time, homes generally appreciate in value (with minor bumps along the way), and that builds equity.

Instead of paying rent to a landlord, you are paying down a mortgage, and over the years, you will not only own more of the home, but the home will very likely go up in value.

You want fixed monthly payments

As any young person who has rented an apartment or house knows, rent increases are a fact of life. But with a fixed-rate mortgage, your monthly housing payment remains consistent over time, even 30 years. That stability is comforting.

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You want to make changes to a home

Homeowners have the freedom to renovate or make changes to their home as they see fit and do not need the permission of someone else to do so. My best pal is an artist and he owns a house he painted purple; not my taste, but hey, I have no say, and neither does a landlord nor anyone else. His home is his purple castle.

So, if owning a property where you can fully express your personal tastes is important to you, buying is the better option.

When renting makes more sense

While buying a home clearly has its benefits (especially if you like purple!), renting can offer its own advantages in certain situations.

You need flexibility

If your lifestyle is such that you need to think more in terms of flexibility and the short term, then renting is definitely a better choice. For example, if you are a student, or your work demands frequent relocation, or you’re caring for an ill parent, then renting offers the flexibility and ability to relocate without much notice or hassle.

You want to enjoy lower costs

When you buy a home, you typically need a substantial down payment, as much as 20% of the purchase price, along with closing costs, which can total thousands of dollars. Plus, if you buy at a time when mortgage rates are up, you could find yourself facing very expensive ongoing monthly payments.

Renting, on the other hand, usually requires only a security deposit and the first and maybe last month’s rent, making it much more affordable for people who do not have large amounts of cash.

You want maintenance-free living

One of the biggest perks of renting is that maintenance and repairs are typically the responsibility of the landlord. But if you’re the homeowner, unexpected expenses like a broken water heater or roof repairs can be quite expensive.

The surprising conclusion: It depends

While the decision to rent or buy may seem obvious, the surprising reality is that there is no one-size-fits-all answer. For some, the flexibility and affordability of renting suits their lifestyle better, while for others, homeownership provides long-term stability and wealth-building potential.

The key then is to assess your personal situation, financial goals, and long-term plans, and choose accordingly.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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