Why buying a house is better than renting

Choosing to rent or buy your home is a major decision that affects not only your lifestyle but also your financial health. Real estate ownership is touted as an investment that is likely to build equity and a source of tax deductions. Renting also has its advantages, including little to no responsibility and flexibility. However, people often believe that buying a home, rather than renting, is a more financially sound decision.

In the U. This is partly because of the decades-old message that being a homeowner is the key to happiness and part of the American dream. Real estate is also big business for everyone, from mortgage lenders to real estate agents to home improvement stores.

It is a part of our cultural mindset and economy. Consider the pros and cons of each to figure out whether renting or owning is best for you. Renting means you can move without penalty each time your lease ends. However, it also means you could have to move suddenly if your landlord decides to sell the property or turn your apartment complex into condos.

Less dramatically, they could just bump up the rent to more than you can afford. The biggest myth about renting is that you're "throwing away money" every month. This is not true. You need a place to live, and that always costs money in one way or another. While it's true that you aren't building equity with monthly rent payments, not all of the costs of homeownership will go towards building equity.

When you own, you might pay nothing more than your mortgage and regular bills in one month. While you might be temporarily inconvenienced by a leaking roof as a renter, it's unlikely you'll ever have to pay to replace your roof when you rent. Your monthly, home-related expenses, such as renter's insurance, tend to be more predictable and significantly cheaper.

As a renter, you face unpredictable rent increases each time your lease is up for renewal unless your apartment is rent-controlled.

If you live in a desirable part of town, rent increases can be steep. In contrast, if you get a fixed-rate mortgage, your monthly house payments will never increase though property taxes and insurance premiums probably will. While homeownership is often touted as a way to build wealth, your home can lose value. The acceptable neighborhood you moved in could decline. A major employer can leave the area, causing a significant population decline and a surplus of housing. Alternatively, there could be a residential construction boom, which could also keep prices down.

Another bit of misleading conventional wisdom: Get a mortgage to get the tax deduction. True, the home mortgage interest deduction reduces your out-of-pocket expenses for mortgage interest early in your loan term, as long as you're itemizing. If you don't have enough deductions to itemize and claim the standard deduction, there is no tax benefit to you as a homeowner.

Of course, renters get no mortgage tax deduction at all. But they can take the standard deduction that's available to all taxpayers. Do you like having your evenings and weekends to use as you please? Do you work long hours or travel frequently?

If so, then the time commitment that comes with homeownership might be more than you want to take on. There are always projects around a house that you will need or want to take care of, from finding a plumber to replacing a rusted-out pipe and repainting the bedroom to mowing the lawn.

If you live in a community with a homeowners association HOA , the HOA might take some homeownership chores off your plate. That will usually cost a few hundred dollars a month. But beware of the headaches that association membership can entail.

If you rent, your landlord will take care of all the repairs and maintenance, though of course they may not be done as quickly or as well as you would like. Although not as universal as homeowners' insurance, renters' insurance is often recommended and sometimes required by landlords for those leasing homes or apartments.

Homeownership brings intangible benefits, such as a sense of stability, belonging to a community, and pride of ownership. However, it is not good for restless or nomadic types. Real estate is the original illiquid asset. You might not be able to sell when you want if the housing market is down.

Methodology To find the best places to own a home, SmartAsset analyzed data on rent and home prices in counties across the U. For each county, we calculated the breakeven point in the buy vs. The counties with the shortest amount of time needed to break even are the best places to own a home. What is an Index Fund? How Does the Stock Market Work? What are Bonds? Investing Advice What is a Fiduciary? What is a CFP?

I'm an Advisor Find an Advisor. Your Details Done. Knowing your location will help us calculate property taxes and home prices. Do this later Dismiss. Monthly Rent. This helps us compare your monthly rental costs against your total monthly owning costs. Target Home Price. This will be used to figure out the costs associated to your monthly home payments.

Down Payment. Down Payment will help us generate your monthly costs of owning a home. Marital Status. We use your marital status to determine the amount of taxes you will pay both while renting and owning. As there can be tax benefits to owning this helps us provide a more accurate answer.

Single Married. Annual Income. We need your income to figure out the federal, state and local taxes you will pay both while renting and owning. If you are married do not include your spouse's income.

Spouse Income. Adding your spouse's income helps us determine your household income tax rate. Home Details. Annual Homeowner's Insurance.

Annual Maintenance Costs. Monthly Additional Expenses. Annual Home Value Increase. Rent Details. Annual Rental Increase. Monthly Renter's Insurance. Annual General Inflation. Annual Rate of Return on Savings.

Enter the general savings rate Do this later Dismiss. Renting will always be better than Buying over the length of the loan. If you stay in this house for 12 year , Buying is better than Renting. If you stay in this house for 12 year , Renting is better than Buying. About This Answer. Our Assumptions. Our Home Buying Expert. As a result, the monthly mortgage payment will not change.

With an adjustable-rate mortgage the interest rate changes, generally on an annual basis, as the market interest rate changes. Often structured to have a steady monthly payment for a specified period of time before adjusting. Based on a mortgage. View personalized rates. Searching for Mortgages About our Mortgage Rate Tables: The above mortgage loan information is provided to, or obtained by, Bankrate.

Some lenders provide their mortgage loan terms to Bankrate for advertising purposes and Bankrate receives compensation from those advertisers our 'Advertisers'. Other lenders' terms are gathered by Bankrate through its own research of available mortgage loan terms and that information is displayed in our rate table for applicable criteria. In the above table, an Advertiser listing can be identified and distinguished from other listings because it includes a 'Next' button that can be used to click-through to the Advertiser's own website or a phone number for the Advertiser.

Availability of Advertised Terms: Each Advertiser is responsible for the accuracy and availability of its own advertised terms. Bankrate cannot guaranty the accuracy or availability of any loan term shown above. However, Bankrate attempts to verify the accuracy and availability of the advertised terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program.

Click here for rate criteria by loan product. Loan Terms for Bankrate. To receive the Bankrate. This will typically be done by phone so you should look for the Advertiser's phone number when you click-through to their website.

In addition, credit unions may require membership. You should confirm your terms with the lender for your requested loan amount. Your monthly payment amount will be greater if taxes and insurance premiums are included. Consumer Satisfaction: If you have used Bankrate.

How can we help? All Numbers. Find a location. About UFCU. Establish Your Finances. Understand Your Credit. Conquer Financial Challenges. Give us a call at HOME for a free, no-pressure mortgage loan consultation. You can also visit your local branch anytime to chat with a Personal Financial Representative or apply online now.

Was this article helpful?