{"id":16183,"date":"2023-06-21T09:00:11","date_gmt":"2023-06-21T16:00:11","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=16183"},"modified":"2025-12-01T03:00:53","modified_gmt":"2025-12-01T11:00:53","slug":"buyer-is-it-better-to-rent-or-buy-a-house","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-is-it-better-to-rent-or-buy-a-house\/","title":{"rendered":"To Rent or to Buy A House: All the Arguments for Each Option"},"content":{"rendered":"

\u201cShould I rent or should I buy<\/a>?\u201d: The age-old dilemma that many grapple with when considering what would be their best living (and housing) situation.<\/p>\n

For all the commitment-phobes out there, the prospect of buying a house can be daunting. It\u2019s a big investment<\/a>, and usually it\u2019s based on a 20- or 30-year mortgage<\/a> contract, unless you plan on selling before it\u2019s paid off \u2014 and that has its own set of challenges. Renting a home comes with a lot of flexibility and freedom that\u2019s attractive to nomadic souls as well as those with savings that are slim to none.<\/p>\n

On the other hand, buying a home can be liberating and, at the same time, stabilizing. If you own your home, you can do whatever you want with it \u2014 paint over those crazy wall colors from the \u201980s, replace or remove bad carpet, decorate or upgrade at will, keep as many pets as you want, and so on. There\u2019s also the benefit of knowing exactly how much your house payment will be every month with no threat of it increasing over time if you got a fixed-rate mortgage.<\/p>\n

That being said, there are very legitimate reasons both to rent and buy a house<\/a>, and it all depends on your unique status and circumstance. Making a decision requires taking stock of your current needs, goals, and financial capacity. Once you\u2019ve evaluated where you are and where you want to be, it\u2019ll be up to you to determine whether it makes more sense to rent or to buy.<\/p>\n

But before you give your final answer, know the specifics of what you\u2019re getting into with each arrangement. Here\u2019s a big-picture breakdown with research and insight from industry experts. You hold all the cards \u2014 you just have to know how to play them.<\/p>\n

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The case for renting a house<\/h2>\n

Flexibility and finding what you want<\/h3>\n

One major perk of renting is that it allows flexibility, so you\u2019re not confined to a neighborhood, a time frame, or a house you\u2019re just not sure about yet. This can be particularly reassuring if your job or lifestyle could change in the near future.<\/p>\n

For example, if you\u2019re anticipating a location move for a job, a possible change in relationship status, or if you\u2019ve just moved to a new city you\u2019re still getting to know, renting gives you options for adapting to all the changes that life brings.<\/p>\n

\u201cIf someone\u2019s not certain about their job situation \u2014 they may get promoted to a different location within their company in a year \u2014 then it might make more sense to rent and not be tied down to a particular market location,\u201d says Drew May, an Augusta, Georgia<\/a> real estate agent.<\/p>\n

Maybe you\u2019re newly single or it\u2019s your first time living with roommates. Renting provides the flexibility and peace of mind to find the best housemate and type of home or layout that works best for you, without being locked into a long-term arrangement.<\/p>\n

Maybe you\u2019re working toward buying a house or you\u2019re brand-new to an area and you want to decipher what neighborhood best suits your needs. The temporary option of renting allows you to try out a different neighborhood if you\u2019re not sure about your current one. Furthermore, if you want to be in a certain in-demand neighborhood because of its amenities or proximity to work, finding affordable rental properties in more expensive areas can be more feasible than buying.<\/p>\n

Financial considerations<\/h3>\n

Other than a security deposit and renter\u2019s insurance, which is typically very affordable, there are no extra or hidden costs with renting a home. Just like homeowners, renters are responsible for a monthly payment and utilities (although in many cases, some utilities, like the water bill, are covered by the landlord), but none of the other expenses that come with homeownership.<\/p>\n

Where you can save money by renting<\/h4>\n

Homeowners have to pay property taxes, which are determined by the property tax rate in a given market location and the value of the home. It varies state by state, but the national average of property tax rates<\/a> on a home value of $250,000 is 1.08%, or $2,700 a year, as of February 2020. Renters are not responsible for paying property taxes.<\/p>\n

Homeowner\u2019s insurance<\/a> is required for a mortgage loan and is highly recommended whether or not a buyer is financing their house. It\u2019s necessary in the unfortunate event of a fire, theft, hail, or any other unforeseen event that damages the home or property, or injures someone else on your property. There are several factors that determine the cost of homeowner\u2019s insurance<\/a>, such as your ZIP code and the scope of coverage.<\/p>\n

The national average of annual homeowner\u2019s insurance is $1,228 as of February 2020, but that varies widely by city \u2014 from Honolulu, Hawaii, on the low end with a $332 average annual premium, to Conch Key, Florida, on the high end with an $11,702 average annual premium.<\/p>\n

For a stark contrast, renter\u2019s insurance costs, on average, $187 a year<\/a> and covers nearly everything homeowner\u2019s insurance does \u2014 except for the house itself, which the landlord is responsible for covering.<\/p>\n

Another financial barrier that\u2019s removed for renters is there is no down payment required to rent a house, aside from the security deposit, which typically is one month\u2019s worth of rent. The down payment is a percentage of the home value<\/a> buyers pay when they purchase a house, which can range from 0% with a VA or USDA loan to 20% with a conventional mortgage loan \u2014 or even higher, if buyers have the funds.<\/p>\n

What about maintenance costs? Nope, renters don\u2019t have to pay those, either. The landlord is responsible for fixing broken appliances, heating or cooling issues, plumbing problems, and anything else that would make the unit uninhabitable.<\/p>\n

Housing market limitations<\/h3>\n

There\u2019s no getting around it \u2014 you need money to purchase a house to pay for the aforementioned homeowner’s insurance, property taxes, maintenance issues, down payment, and of course the monthly mortgage payment. That requires being in a financial position to do so, and the state of the housing market can put an extra strain on your ability to buy a house.<\/p>\n

The availability of homes on the market, especially for first-time homebuyers, is at historically low levels. According to HomeLight\u2019s Top Agent Insights Report for the fourth quarter of 2019<\/a>, almost half of the agents surveyed (46%) said that inventory levels were lower than they expected.<\/p>\n

May backs up these reports:<\/p>\n

\u201cThe starting point for a first-time buyer for a starter home is limited inventory under $200,000. The cost of construction has been going up, the cost of materials, the cost of land development. So we don\u2019t anticipate that it\u2019s going to get cheaper or more affordable than it is right now.\u201d<\/p><\/blockquote>\n

The fluctuating nature of the housing market is another consideration when deciding whether renting or buying a home is right for you. Selling a house can be tricky and harder than some might think. \u201cIf it\u2019s a declining market where prices are going down, or where the market is very uncertain, renting might be the safer way to go,\u201d says May.<\/p>\n

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The case for buying a house<\/h2>\n

Buying a home is an investment<\/h3>\n

There are a lot of financial advantages of buying a house if you\u2019re in a position to do so, and top among them is your equity. Equity is where most homeowners build most of their wealth; it represents the amount or value of your home that you own outright (as opposed to what you still owe on your mortgage). You can calculate equity by subtracting the amount you still owe from the current market value of your home. The difference is how much equity you have, which will be greater depending on how much you\u2019ve already paid on your mortgage. And as your home increases in value over time \u2014 which many do \u2014 you\u2019ll build even more equity.<\/p>\n

Another way to look at building equity is that it\u2019s a type of forced savings account. It\u2019s \u201cforced\u201d because you have to pay your mortgage every month, which in turn builds equity.<\/p>\n

There are many ways you can tap into home equity<\/a>, including:<\/p>\n