Recently I published an article on the costs of owning a home. The purpose of that article was to shed a light on all of the costs (including some hidden costs) that come with being a homeowner, rather than to debate whether it’s better to buy or rent.
In this article, I’d like to discuss the pros and cons of buying a house and the pros and cons of renting. Hopefully, this renting vs. buying debate will help you to make the best decision for your own situation.
For some background, my wife and I have been homeowners for the past 12 years. I bought a home mostly because I assumed it was the smart thing to do, based on advice everyone had given me throughout my life.
Through the experiences of buying, owning, and eventually selling a few houses, I’ve seen that there are plenty of downsides to owning a home as well. I like to think I’m fairly neutral in the buy vs. rent debate. I choose to own a home, but I don’t think it’s the right decision for everyone, and I’d like to present a realistic and balanced view on the topic so you can make an informed decision about what is right for you (and your family, if applicable).
Other articles in this series:
- Considering Moving? Here are the Costs of Buying and Selling a House
- The True Costs of Owning a Home: It May Surprise You
- Realities of Mortgage-Free Living
Should I Rent or Buy a Home? Factors to Consider:
When you’re trying to decide between buying a house or renting, here are some of the most important things you should consider.
1. How Long Do You Plan to Live in the Home?
The most important factor in the buying vs. renting decision is how long you plan to live in the home. As a general rule of thumb, if you plan to live in the house for less than 5 years, you will be better off renting. And if you are in the house for more than 5 years, you will be better off buying.
There are significant costs involved with buying and selling a home, and typically you will need at least 5 years in order to build up enough equity to break even with those costs. Of course, there are a lot of variables here, like whether home prices are increasing or decreasing during this time frame.
Since it’s difficult to predict what will happen with home prices and the overall economy, 5 years is a good general rule that you can go by. Of course, that doesn’t guarantee anything, but it’s a good starting point for your decision.
2. How Much Debt Do You Have?
If you have consumer debt like credit card balances or personal loans, you should pay off that debt before buying a home. It would be great if you can pay off other debt like car loans and student loans before buying a home, but that’s not always possible.
If you currently have debt, keep in mind that adding a mortgage is only going to make things harder. Not only will you be adding more debt, but you don’t want to run the risk of not being able to pay your mortgage and losing your home.