Should I rent or buy a house | Money | Roost
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Should I rent or buy a house?

Are you throwing away money on rent?

To rent or buy a house, that’s the question. It was The Clash that famously asked “Should I stay or should I go now?” — a musical question that’s impossible to answer, but echoes of it can be heard across the nation. When people change jobs or move across the country or make other big life changes, you’re likely to hear:

“Should I rent or should I buy now?”

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It’s not a question with an easy answer, as the response is different for each person, and can change as circumstances change. But, if you’re asking the question yourself, you’re here for some advice, and that’s why we’re here!

Read along to get the scoop on how to make this important decision plus learn how to use our tool to help you take the data you already have and use it to inform your decision on whether you should rent or buy a house.

Reasons to RentReasons to Buy
Not staying long in one placeInvestment
Chance to improve your creditFinancial consistency
Don’t have to pay for maintenanceTax breaks
No hidden costsSecurity

Reasons to rent an apartment

For many people, a rented room or apartment is the first type of living quarters they get to enjoy on their own. Maybe they lived with their family or in a boarding school or a dorm during their youth but, when striking out on their own, they ended up in an apartment.

For people just starting out in the working world, it can make a lot of sense. And renting an apartment is a good option for others as well, especially those undergoing life changes, like a divorce or a cross-country move for work. For these people, renting makes a lot of sense.

Financial reasons to rent

Living expenses can typically take up 40% of your monthly budget, which is usually the biggest chunk of our hard-earned dough. So it’s important to think hard when you’re deciding where to live, as you’ll be writing rent or mortgage checks every month.

So, consider these financial reasons for renting an apartment:

  • Not interested in paying for maintenance? When your faucet starts to drip or an electrical outlet stops working all you have to do is call your landlord. There are no surprise, unplanned for house repair expenses.
  • Trying to get more financially settled? You might be in a situation where you’re trying to pay off student debt or take care of those credit cards you may have maxed out when you were traveling around Europe busking with your accordion. If you do have a lot of debt, it could be wise to rent a place for a few years as you pay down that debt. Then, you’ll be better suited to get approved for a strong mortgage when you are ready to get that house.
  • Not staying long? Let’s say you’re a contractor who signs contracts for, say, 12-months’ work. Your work may take you to an entirely different city or state in a year, so it’ll be easier to sign a lease and rent than it would be to buy a house and turn around and sell it quickly (and then buy another house in your next city!)
  • Don’t want any hidden costs? With a rental, you typically just pay rent. (in some cases, you’ll pay renter’s insurance, but with mortgages, you often have to pay private mortgage insurance, so it can be a wash). With a mortgage, you’ve got your payments on the loan, plus property taxes, homeowner’s insurance, and up-front costs, like closing fees and more taxes.

Reasons to buy a house

As you may have guessed, there are also lots of great reasons to buy a house. For some, it’s a lifelong dream. For others, it’s a great investment. For most people, it’s a little of both, with a lot of other factors thrown in. Here, then, are a few reasons why buying a house might be the right move for you.

Financial reasons to buy

When you’re making housing decisions, you might be thinking with your wallet. After all, so many Americans view homeownership as the ultimate financial decision. In many cases, choosing to buy a home is the right financial decision for you, but it’s best to think about some factors when deciding if you want to buy a house at this time in your life:

  • It can be a great investment. When you pay a mortgage, you build equity in your home. You can eventually borrow against that equity and, someday in the not-too-distant future, you’ll actually own the home outright. You could sell it for a profit then or maybe turn it into a museum — whatever you want! If you feel like you’re at the point in your life where you want to be putting your money toward building financial security, then buying a house is right for you.
  • Financial consistency. If you have a fixed-rate mortgage, your monthly payment will stay the same. The same can’t be said for your rent, which could fluctuate from year to year, lease-to-lease if you stay in the same place, or change drastically if you move to a new apartment.
  • Taxes. As a homeowner, you could be eligible for certain tax deductions. You can deduct mortgage interest paid on the first million dollars of your mortgage, property taxes, and certain other expenses from your income taxes. The government has created these tax incentives to make home-buying more appealing to you, so you should take advantage of it as much as possible.
  • Security. When you own a home, you’re the one who controls your own destiny. Your landlord can’t just up and decide not to renew your lease or sell the property to someone else. This can give you peace of mind that is impossible to put a price on.

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Rent vs. buy: Doing the math

The above factors all play into the equation of whether it makes more sense for you to rent or buy a house. Thinking about the location you want to live in and the time you want to spend there, you can calculate other factors and make an informed decision as to which option makes more sense to you. 

Your next step for you is to get a sense of the cost of the home you’d be considering, the terms of the mortgage you’d be seeking and the cost of monthly rent you’d be paying. Then, use a rent vs. buy calculator to determine which option is the best one for you. This way, you can make a logical, informed decision and feel confident about your new home!

For example, in the table below you can see the minimum number of years you’d need to own the home before it makes sense to buy vs. rent assuming the following:  

  • 20% down 
  • 30-year mortgage at 3.75%
  • Compared to an average-cost 2-bedroom apartment
CityAverage Home CostAverage rent on 2 bedroom TermsYear in which owning a home results in a gain
Portland, OR$450,000$1,8004
Cincinnati, OH$165,000$1,5002
Minneapolis, MN$300,000$2,4002
New Mexico$210,000$1,0003
Irving, TX$240,000$1,4002

So, should you rent or buy?

It’s up to you! Obviously, whether to rent or buy a house is your decision, and it’s probably not much easier now than it was when you started reading this article. Look, we know it’s a difficult decision that goes far beyond the factors we listed above. But we hope we gave you a starting point.

The main point we hope you take away is that you should consider both financial and personal reasons when you’re choosing your living arrangements. Think about your lifestyle — the type of home and neighborhood you want to live in at this point in your life.

Think about money — the money you have in the bank, the money you owe, and the money you want to save and build for the future. Think about all of these things and do so carefully. To rent or buy a house is a big decision and you want to be sure about your choice. Be sure to use our tool to get firm answers about each option. Then, when you’ve got the right answer, take a deep breath and figure out the next steps toward finding our next place to live!

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A quick note! Our goal is to gather and share info that’s up-to-date and helps you make great decisions as a renter. That said, the information you get directly from a provider could be a little different. Make sure to review their terms and conditions directly; and, if you see anything here that needs to be updated, please let us know! Advertising disclosure
Last Updated: September 24th, 2021