The choice between renting or buying a home may be one of the biggest decisions you make in your life.
Each option comes with financial trade-offs—plus nonfinancial, personal considerations, which can be equally important.
When you rent, you’re paying a landlord the right to occupy a space. You are not responsible for maintenance or property taxes.
When you buy, you own the space and are responsible for upkeep and taxes. But as the value of the home appreciates over time, you can build wealth.
There are advantages and disadvantages to both renting and buying.
How much you’ll pay is another big part of the rent vs. buy equation.
As you weigh the pros and cons of renting and buying, ask yourself:
If you answered no to any of the above, then it could be that renting is still right for you (for now).
If you’re truly undecided or you’re trying to make a cool-headed decision based on the numbers, consider the rule of 20.
According to the rule, multiply your annual rent (i.e., monthly rent times 12) by 20. Compare that figure to the value of homes in your area. If the purchase prices are lower, it may be more cost-effective to buy. However, if the multiplied rental value is higher, it may make more sense to keep renting.
“Why pay the landlord’s mortgage when you can pay your own?“
Whether to rent or buy is one of the biggest financial decisions you may make. To figure out what’s right for you, you need to balance the costs that go into renting versus the commitment that goes into buying. Although the financial pros and cons of each option are important, ultimately renting or buying is a personal decision.