Should I Rent or Buy a Home?

Should I Rent or Buy a Home? October 18, 2011

After getting married three years ago, my wife and I thought [briefly] about buying a home.  We decided that renting was our best option at the time, and I’m really glad we did.  Mobility was our biggest factor since she was applying to medical school; and this summer we ended up moving to a new city since she was accepted to a med program.

“But you’re throwing your money away if you rent!”  I don’t know if people say it as a reflex or just to convince themselves, but I don’t feel like we’re throwing money away at all.

Let’s face it, having a roof over your head is a good/service just as hiring a plumber, buying clothes, or food is a good/service that we spend our money on.  It’s an expense that everyone has to pay some way or another.  Whenever I hear someone say that renters ‘throw away money each month,’ I have to disagree.  The rent I pay for having a roof over my head was hardly a waste!  It kept me dry, comfortable, and clean – well worth the money I spent to have these amenities.

Besides, when you think about the actual payments made on a mortgage, a lot of it is ‘thrown away’ towards interest.  Use any mortgage amortization calculator and you’ll see that approximately 80% of your monthly payment goes towards interest for the first five years!  Between years 6 and 10, you’ll see about 70% of your monthly payments go towards interest.  We can easily say that both renting and buying are ways to throw away your money – but that would be wrong because we find value in having a roof over our head for that month.

Deciding to Rent or Buy a House

We still have a few years until she’s done with medical school and residency, so buying a home probably isn’t in our immediate plans.  BUT, it’s still something we’ll be looking at in the close future and here’s what we’ll be thinking about when the time comes to make that decision:

Pros of Buying a House

– Good Homes at Great Prices

There are a lot of great homes at excellent prices.  Some have even said that the housing market may take a double dip.  That’s great news for renters looking to buy a home.  While it’s a pro to buying a home, it’s not a factor that will cause us to jump the gun on buying a home.

– You Get Tax Deductions

Yes, it’s true that you can deduct the interest you paid as well as the property tax IF you don’t take the standard deduction.  For us, we just get the standard deduction, so this won’t really be a factor in our first home purchase.

– You’re Building Equity

We certainly hope so, right?  I have no idea what the housing market will do in 5, 10 or 30 years, so I’m not counting on home equity for anything.  I view housing as an expense, and not an investment.   That’s what investment accounts are for.

Cons of Buying a House

– You’re Stuck

If you need to make a move quickly because of a job, family issues, or other life changes, you could be making two house payments.  You’re at the mercy of the market and if you can’t sell your house, it might cause you to miss opportunities.

– Property Tax, HOA, PMI

There are certain costs that directly affect homeowners.  While property tax and other qualified expenses can be considered tax deductible, they’re still an expense that YOU have to PAY.  Homeowners association dues, private mortgage insurance, and other expenses can really add up, so don’t forget about these when you think about that monthly mortgage.

– Interest Eats Your Payments

We discussed the ‘throwing your money away’ phrase that affects both renters and buyers.  I don’t consider it a waste, but if you do, it’s important to consider it as a con of buying a home.

Pros of Renting A House

– You Maintain Flexibility

This is our reason why we still rent.  If you want to have flexibility to accept a job across the country, start school three states away, or move closer to family, renting might be for you.

– You Don’t Have to Fix Things

When you rent, your contract often (and should) calls for the owner to fix any problems.  This includes appliances, structural issues with the home, or really anything else that needs repair in the rental.  I’ve heard it said that you should save at least 10% of your mortgage payment to cover home repairs and other house related emergencies.

Cons of Renting

– You Don’t Make the Rules

If your landlord doesn’t want pets, you won’t have a pet.  If your landlord doesn’t want your walls painted, you can’t paint the living room.  Be prepared to follow the rules made by your landlord, it’s that simple.

– You Don’t Build Equity

To be fair, I’ll include this point.  As a homebuyer, some of your money (though it’s really a small amount) goes towards your home’s equity.  You don’t get this luxury as a renter because all of your payment goes to the landlord.

Important Questions for Renting Vs. Buying

You shouldn’t make a decision simply based on these pros and cons listed above.  The decision to buy or rent a home is much more involved than that. You need to factor in these questions:

How Long Will You Be There?

Experts say that you really shouldn’t buy a home unless you plan on staying there for 5-7 years.  If you don’t see that happening, you probably should consider renting.

Is Your Family Growing?

Why would you buy a home with two bedrooms if you plan on having a few kids in the next couple of years?  It sounds too simple to even mention, but it’s a question you need to think about.

What are Your Professional Goals?

Thinking about graduate school?  What about starting a business or joining a larger company?  Will those things cause you to move to another location?  One year of renting to think through those possibilities can really save you headaches in the long run.

Can You Afford It?

Aah, yes.  The ultimate question…can I afford a home AND all the costs associated with it.  When you rent, you have the flexibility to downsize quickly in case you lose a job or need to adjust financially.  If you own a home, you might find yourself in a world of hurt if you can’t afford to make your monthly payments.  That’s why it’s so crucial that you have an adequate emergency fund and do everything you can to keep your mortgage payment reasonable.

I hope I covered both sides of the issue and encourage you to really do your research before deciding on buying or renting.  To help your research, consider this awesome rent vs buy calculator from the New York Times – it’s really a great visual to help you think about the pros and cons.

We’ve decided on renting for a while, but you might feel differently.  Are you in talks about renting or buying a home?  What factors are most important to you?  I’d love to hear your comments!

"I read through quickly so I may have missed if Mr. Wesley provided for the ..."

5 Bible Verses John Wesley Used ..."
"Oh how they twist scripture, sadly, I was involved with the prosperity so-called gospel for ..."

The Bible: Getting Rich Quick & ..."
"Yup and then they use the Bible to justified why people are poor and deserved ..."

The Bible: Getting Rich Quick & ..."
"What if you aren't a christian, will they still cover you if you adhere to ..."

Our Medi-Share Review [for 2018]

Browse Our Archives

Follow Us!


TRENDING AT PATHEOS Evangelical
What Are Your Thoughts?leave a comment
  • Good points! Affordability and are you going to be there more than 5 years are the most important questions.

    • Tim

      Those really are key – if you can’t say yes to both, you’ll have a hard time convincing me that purchasing a home is a good decision.

  • Tom

    I buy with the intent to rent the home out afterwards. Never intended to ren it out when I was in Hawaii but had to move because of my job. After a refi the place is now cash flowing with the renter paying my rent and association fees. It’s not as easy as it sounds but if you make small mistakes the first time it gets easier the second time, then the third time, and so on.

    • Tim

      Sounds like you’re getting the hang of it though. Inspired by Kiyosaki to do real estate? I know that’s how he made quite a bit of money.

  • If you are saving money per month BECAUSE of the renting then you are building equity…just happens that equity is in cash instead of in a house.

  • If you can get a good deal on a house, then buying is better. Next 2 – 3 years still be great time to buy as housing market will be low. Buy now as investment as well because eventually it will turn around. But buying a house comes with new responsibilities so be prepared. You really cannot be lazy as a home owner.

  • Pingback: Straight Talk on Debt: Moving Again for Better or Worse()

  • Pingback: Straight Talk on Debt: Moving Again for Better or Worse()

  • The reasons you laid out for why you are renting are right on Tim. The big “tip” I always tell people when trying to decide if they can afford it (that is often skipped) is to calculate that affordability based on ONE INCOME only! You never know if Mom (or maybe even Dad) will end up at home with the kids or someone is laid off for an extended period of time. My wife, Mandy, and I didn’t do that and ended up having to move after she stayed home when our oldest was born. BTW, I really like Evan’s comment!

  • The reasons you laid out for why you are renting are right on Tim. The big “tip” I always tell people when trying to decide if they can afford it (that is often skipped) is to calculate that affordability based on ONE INCOME only! You never know if Mom (or maybe even Dad) will end up at home with the kids or someone is laid off for an extended period of time. My wife, Mandy, and I didn’t do that and ended up having to move after she stayed home when our oldest was born. BTW, I really like Evan’s comment!

  • I just finished writing a 3-part series about how I bought a home for the sake of renting it out. Now I “pay rent” to myself.

  • I just finished writing a 3-part series about how I bought a home for the sake of renting it out. Now I “pay rent” to myself.

  • Pingback: Weekend Wrap Up #2 | 20's Finances()

  • Pingback: Weekend Wrap Up #2 | 20's Finances()

  • Pingback: Weekend Wrap Up #2 | 20's Finances()

  • Pingback: Weekend Wrap Up #2 | My Blog()

  • Pingback: Weekend Wrap Up #2 | My Blog()

  • Wow, this is excellent! I’m so glad to see an article not buying into the buying a house as an “investment” myth. Although now is probably the best time to buy a home you could imagine, renting does make sense for a lot of people.

  • Wow, this is excellent! I’m so glad to see an article not buying into the buying a house as an “investment” myth. Although now is probably the best time to buy a home you could imagine, renting does make sense for a lot of people.

  • i think making sure you can afford the payments is the first important thing, in this market you do not want to have to move a few times and try to sell several homes if you do not have to, and if this is the case renting may be a good stepping stone.

  • i think making sure you can afford the payments is the first important thing, in this market you do not want to have to move a few times and try to sell several homes if you do not have to, and if this is the case renting may be a good stepping stone.

  • Benita

    This is a great article. I’ve been struggling about renting or buying as we prepare to relocate to a high cost area. Tim you’ve given us a few points to consider that I hadn’t thought about before.

    Thanks!

  • Benita

    This is a great article. I’ve been struggling about renting or buying as we prepare to relocate to a high cost area. Tim you’ve given us a few points to consider that I hadn’t thought about before.

    Thanks!

  • Pingback: Totally Money Carnival: Scared Straight Edition | Modern Tightwad()

  • Pingback: Totally Money Carnival: Scared Straight Edition | Modern Tightwad()

  • For now I welling to rent home because I’m so younger to buy home and I have no money to buy immediately..

    I recommend to you to rent a room Newark in UK.. It’s the best rentals homes… I proved it..

    Thanks for being interesting my comment.. God bless..

  • For now I welling to rent home because I’m so younger to buy home and I have no money to buy immediately..

    I recommend to you to rent a room Newark in UK.. It’s the best rentals homes… I proved it..

    Thanks for being interesting my comment.. God bless..

  • Pingback: How to Decide Whether to Rent or Own a Home | Easy Money Making From Home()

  • Pingback: How to Decide Whether to Rent or Own a Home | Easy Money Making From Home()

  • Pingback: How to Decide Whether to Rent or Own a Home | DivineGifts()

  • Pingback: How to Decide Whether to Rent or Own a Home | DivineGifts()

  • Pingback: How to Decide Whether to Rent or Own a Home | DivineGifts()