Buying vs. Renting: How to Decide

The case for buying

• You build equity. Each payment reduces your loan balance, and if your home’s value rises, your equity grows with it.
• Predictable housing costs. With a fixed-rate mortgage, your principal and interest payment stays the same for the life of the loan. Taxes and insurance can still change.
• Control over your home. Paint, renovate, garden and have pets without asking a landlord.
• Stability. No lease renewals or surprise moves when a landlord sells.
• Possible tax benefits. Mortgage interest and property taxes may be deductible if you itemize. Since the 2017 tax law raised the standard deduction, fewer homeowners itemize, so check with a tax professional. IRS Publication 936 explains the rules.

The case for renting

• Flexibility. Easier to move for a job or a change in plans.
• Lower upfront costs. A security deposit instead of a down payment and closing costs.
• No repair bills. The landlord pays for a new roof or water heater.
• Time to prepare. Renting while you build savings and credit can lead to a better loan later.

Costs that are easy to overlook

Homeowners also pay for: property taxes, insurance, maintenance and repairs, HOA dues, and possibly mortgage insurance. Closing costs and moving costs come at the start, and selling costs come at the end.

Renters also pay for: rent increases at renewal, renters insurance and the cost of moving more often.

Questions to help you decide

1. How long will you stay? Buying and selling have costs, so owning tends to make more sense the longer you stay. If you may move within a few years, renting may cost less.
2. Is your income stable? A steady job and emergency savings make homeownership less stressful.
3. Do you have savings for upfront costs? Include the down payment, closing costs and a cushion. Many buyers need less down than they think; see our guide to saving for a down payment.
4. How do the monthly costs compare? Compare rent with the full cost of owning, not just the mortgage. Our guide to how much house you can afford helps.
5. What matters most to you? Flexibility, control, stability and building equity all have value. Weigh them for your life.

The CFPB’s Owning a Home tools can help you work through the numbers.

Curious what owning could look like? A loan officer can estimate what you’d qualify for and your cash to close, so you can compare it with renting.

This article is general information, not an offer to lend or a commitment to lend. All loans are subject to credit approval, underwriting and property valuation. Belem Servicing LLC, NMLS ID #715386 (NMLS Consumer Access).

Sources

• Internal Revenue Service, Publication 936: Home Mortgage Interest Deduction
• Consumer Financial Protection Bureau, Owning a Home