Should I Rent or Own a Home? Key Differences to Consider

The upfront cost of buying a home vs renting is higher, but in the long run what are the financial comparisons? We dive into the financial costs of renting vs. buying a house to help you evaluate your current situation.

Is it Cheaper to Rent or Buy?

The costs of renting or buying are comparable in some areas but different in others. Below we break down some of the costs you face whether you’re renting or buying.

Costs of Renting

The cost of renting a home is compiled of several things like your monthly rent, initial security deposit, renters insurance and a possible fee for having pets. Similar to purchasing a home, the price of renting varies depending on where you want to live. Somewhere like New York City will be more expensive than a small town in Kansas. Regardless, a good rule of thumb is to keep your monthly renting costs at or under 30% of your monthly take-home pay.

Costs of Buying

The costs of buying a home is also compiled of varying factors like the initial down payment, monthly mortgage payments, homeowners insurance, utility bills and possible homeowners association (HOA) dues. One of the difficulties going from renting to buying is not knowing how much mortgage you can afford. It’s easy to think of it as a monthly amount, but you have to do a bit of math to calculate a home value amount and ensure you’re putting yourself in a financially safe position.

Advantages of Renting a Home

1. No Hidden Expenses

   When you rent a home, you can avoid surprise one-time costs like closings costs and a monthly HOA fee. The amount you owe each month is outlined in your contract, leaving you with no hidden surprises.

2. Save on Maintenance Costs

   When you rent a home and something isn’t working right, you simply call the maintenance number to get someone in to fix it, on the property owner’s dime. With owning a home this cost would come out of your bank account, making this an appealing financial reason to rent a home vs buying.

3. Predictable Monthly Payment

   You know how much your monthly payment will be upfront, although it can change at the end of the contract if you agree to renew at a new price. Having a set monthly payment allows you to better manage a monthly budget.

Advantages of Buying a Home

1. Build Equity

   When you pay your monthly mortgage payment that money doesn’t just go away, the money that goes toward your principal amount helps you build equity in your home, allowing you an opportunity to get more money out when you sell.

2. Asset Appreciation

   When you make upgrades to your home it can add value to what your home is worth. Unfortunately, when you do this in a rental, you typically don’t get any monetary compensation out of it.

3. Possible Tax Benefits

   With homeownership comes possible tax deductions, giving you a way to maximize your income. If you meet certain requirements, you can deduct the interest you pay on mortgage debt up to $7500,000 (if filled jointly) and possibly get deductions on real estate taxes and private mortgage insurance if you have a tax-deductible mortgage insurance and meet income requirements.

We're Here to Help

Whether you’ve decided to rent your next home or buy, we’re here to help. Connect with a local Farm Bureau Agent to get a quote on your home today.