Minimalist Lifestyle Chapter 01: Renting vs. Buying a House Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mint Published Jul 27, 2022 - [Updated Jul 28, 2022] 14 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. Thinking about buying your first house? Then you probably know it’s both exciting and challenging. It’s an opportunity to build equity, and it also gives you the freedom to personalize the place however you want. But it’s also a huge financial undertaking and you have to be sure you’re committed to owning a home and all the costs that come with it. In this series, we’ll be covering everything there is to know about being a first time home buyer, including how to go about saving for a house, the credit score you need to buy a house, the different types of mortgages you can get, and more. The first chapter of our home buying series will cover the differences between renting vs. buying a house. Traditionally, owning a house seems like a wiser and safer option. However, the rent vs. buy debate still goes strong for good reason. There are a lot of factors that come into play—like your personal goals, current income, the economy, and more—and these factors impact whether buying or renting is the right decision for you. In this guide, we’ll discuss some of the pros and cons of buying vs. renting a house in detail, what you should take into consideration when making your decision, and frequently asked questions. Use the links below to navigate the post or keep reading for a comprehensive overview. When to Rent vs. Buy: The Big PictureKey Considerations for Renting vs. Buying a HouseRentingBuyingRenting vs. Buying FAQsKey Questions to Ask Yourself When Making the Decision to Rent vs. BuyMaking the Best Financial Decision for Your Living Situation When to Rent vs. Buy: The Big Picture Before we dive deep into the entire renting vs. buying a house debate and try to look at it from every angle, you should know that whatever decision you end up making will have a significant impact on your lifestyle and finances. While the current homeownership rate in the U.S. is about 66%, that doesn’t necessarily mean you should join those ranks. Buying a house can be an exciting prospect, but it’s important to weigh your options thoroughly before making a decision. You might be surprised to find that renting is the better move for you right now because of where your life is headed or maybe other financial priorities that are more pressing—like being able to build up your retirement account or investing in getting your small business off the ground. Deciding whether to rent vs. buy is a highly personal decision, so make sure you take the time to look at it from every angle. Key Considerations for Renting vs. Buying a House When it comes to buying a home or renting, there are many things to consider. While there are tons of resources on the financial implications of both options, let’s first go over the main considerations for buying vs. renting. Longevity and Flexibility It’s important to consider how long you’re planning to be in a certain area and how much location flexibility you need when you’re making the decision to buy or rent. When renting, the leases are typically 12 months or less and there may be options to work out a more flexible move-out date with the landlord or management company. If you end up needing to move to a different area, you have more flexibility to do so. It becomes a lot more complicated if you need to move away from a home you own. You’ll likely need to sell the house or rent it out—options that require more time and resources than if you were renting an apartment. With the amount of investment and time that a house requires, it’s probably best to stay in a location for at least a few years if you’re going to buy. Personal Values Think about how you want to spend your time. Similarly, it’s also important to consider how much responsibility you’re willing to take on. When you live in an apartment, you barely even have to change a light bulb. There are typically no repairs, no additional investments, and no worries. However, having your first house will be a whole different experience. You’re responsible for cleaning the gutters, mowing the lawn, buying and fixing appliances and other maintenance activities that you never have to think about when you’re renting. Regular or unexpected repairs can quickly add up to large sums when you own a home. Part of the benefit of renting is that you don’t have to deal with or budget for anything like that. There are a lot of first time home buyer expenses that you need to account for when saving for a home, and your budget will probably look a lot different as a homeowner because of them. But even though a landlord will cover maintenance costs in a rented home or apartment, it’s still important to get renters insurance. Renters insurance will help cover unexpected events that happen to you or your family while living at your rented property, like theft, vandalism, or a fire. Customization Another thing to think about is how much customization and control you’d like to have. A home you own can be customized to your exact liking, while a rental has more limitations. From painting the wall a different color to making bigger changes to your living space, you’ll have greater control if it’s your home. With a rental, any customizations would need to be approved by the owner. Construction loans are also available, for those interested. They can be a good option if you want to build a house exactly to your liking. Amenities Amenities are another lifestyle consideration when it comes to buying or renting. Most likely, an apartment will have more amenities than a typical home, such as a: Workout room or poolOn-site gymLarge party roomConcierge service Of course, you may have the option of building or adding similar amenities to a home you buy, but it can be a pricey and impractical investment. If you want a pool without the cost and maintenance that owning one would require, then renting an apartment with a community pool may be the way to go. Also, a rented place might come fully furnished, be it an apartment or a house. You might not have to buy a fridge, dishwasher, or a washing machine, or other large appliances that can quickly add on hundreds or thousands to your expenses. Renting In 2021, the number of households that rent out their homes was 44.1 million. Renting might be an easy choice for some people because it doesn’t tie them down. It even saves them from having to stress about saving up for a down payment and affording mortgage payments. In this section, we will explore some considerable aspects regarding renting. Why Renting Could Be Better Than Buying Renting could be better than buying for certain people for several reasons including: You don’t know how long you’re going to be staying in one city—whether that’s because you want freedom in your career growth or you have a case of wanderlust.If you like being able to take advantage of amenities. Luxuries such as a pool and gym might come as an extra amenity for people living in an apartment complex. Plus, they could get full access to it without any extra charge.If you want to save yourself from paying a considerable amount of real estate tax, renting can be a good option.Buying a house in an expensive city like New York might be a challenge for some people, but renting can be within their financial reach. What Are the Cons of Renting? The cons of renting are: If you have a pet you want to keep, renting a house might be challenging for you. Some landlords have a strict policy against pets.You won’t enjoy certain tax benefits if you rent a house.The rent isn’t fixed, meaning your landlord may increase your rent when you renew your lease or with too short a notice for your accommodation. It’s important to know how much to spend on rent compared to your income, so that you’re able to avoid spending more than you can afford. You can use our rent budget calculator to help figure out approximately how much you should spend on rent. Lastly, one of the greatest cons of renting is that there is no permanence at the end of the day. No matter how much rent you pay, the house won’t belong to you. Buying Many people choose to buy a home instead of renting because it gives them a sense of security and stability. In this section, we will explore multiple aspects that will give you clarity about purchasing a house. Why Buying Could Be Better Than Renting Buying could be better than renting due to the following reasons: For many people, the very idea of living rent-free provides them with peace of mind. You will be paying your mortgage, but that’s also building equity for you. Some people consider buying a house as a way to build wealth. Real estate property will typically increase in worth over time, depending on your region. Moreover, if you don’t want to spend a lot on the house, you can also look into foreclosed homes.A house gives you privacy, peace, and stability. Your children will always have a place to call home. Moreover, you have the power to renovate and remodel your home as you wish. With renting, that’s rarely the case. What Are the Cons of Buying? The pros probably sound really good right about now, but before you make your decision, let’s go over some of the potential cons of buying: In comparison to renting, buying has a higher upfront cost, including appraisal, down payment, and many other fees. The total payment you’re expected to provide upfront will almost always be higher than the first and last month’s rent. This is a large barrier for people—approximately 38% of non-homeowners in the U.S. said they hadn’t purchased a house because they don’t have enough for a down payment.The real estate industry is still recovering from the challenges of the pandemic. According to The White House, home values and, correspondingly, home prices have increased due to pandemic-related disruptions. Your house doesn’t have a set value. Just like it can increase based on the economy and demand, the value can also drop for a period of time. This is because the market is constantly fluctuating. However, the market will usually bounce back, so it’s a matter of waiting until the time is right to sell.There won’t be a landlord for you to call when your washing machine breaks down or when there is a leaking roof to be fixed. If you have a house, you will be solely fulfilling those responsibilities and their costs. One of the most common home buying mistakes is not thinking about homeownership costs. Buying a home costs a lot more than just those monthly mortgage payments. You’ll be responsible for home maintenance as well.If you’re the type of person who loves to enjoy freedom and is always ready to pack up and move to a different city for a new job or to explore new opportunities, then a house may not be a feasible decision.The process of selling can be very long and taxing. It can take a long time to not only find the right home for you, but also to get approved for a mortgage and go through the escrow process. While finding the right home for you might take some time, you can use a house shopping guide to help you throughout your search. If you’re planning to buy, it might benefit you to use a home budget template, so you can keep your finances in good standing and keep up with homeownership costs. The decision to buy or rent is just as much a lifestyle decision as it is a financial one. Renting vs. Buying FAQs What Are the Main Differences Between Buying and Renting? There are several significant differences between buying vs. renting: Buying a house means you own the property and the equity in the home. Renting means you’re paying into someone else’s pocket. You’re not building any wealth for yourself.When buying a home, the buyer will be responsible for maintenance, and in the case of renting, the landlord takes care of the maintenance.Usually, renters are not allowed to modify the property, while homeowners can remodel their place. Homeowners can usually do whatever they want with their home, as long as it’s approved by an HOA if there’s one in place.Upfront costs when buying a house tend to be much higher because you’ll need to pay a down payment, closing costs, and mortgage fees. On the other hand, when you rent a house, you have to pay the first month’s rent, last month’s rent, and a security deposit. Is Renting a Waste of Money? A lot of people tend to think of renting as a waste of money. For those who are looking to build wealth now and have the finances to do so, it can be a waste of money. However, if you’re simply not in a position to buy a home, then it’s not necessarily a waste of money because you don’t have another option. In part, it comes down to perspective. Is Buying Really Cheaper Than Renting? For some people, yes, buying can be cheaper than renting. One of the many pros of buying is that your house can become your asset once you have paid it off. You will have complete ownership of the property. In the case of rent, you have to make the payments for a lifetime. Moreover, you always have the option of refinancing a home by trading your old mortgage with a new and better one that suits your financial needs better. You can also use your home as a rental property, making it an additional stream of income. Key Questions to Ask Yourself When Making the Decision to Rent vs. Buy Whether you buy or rent has a significant impact on your lifestyle, particularly over the long-term. Thinking about what’s important to you and how you want to spend your time will help you determine what best fits your desired lifestyle. Let’s look at a couple of questions that will help you decide between renting and buying. Are you in the financial position to buy a house?Do you plan on staying in one place for at least a couple of years?Do you still want to buy a house even if its price doesn’t rise?What has a better value, renting or buying, in your area?Lastly, what does your gut say? Making the Best Financial Decision for Your Living Situation So, is it better to rent or buy? For you to answer that, keep your financial position in mind. Renting and buying are both viable options depending on your circumstances, so it really comes down to your lifestyle and what you can afford. Now that you have a better big picture understanding of the pros and cons of renting vs. buying, you’re in a better place to make a decision that’s right for you. If you’ve decided to move forward with purchasing a house, you may want to put a financial plan in place. Use the free Mint app to help you track your spending and savings—you can even create a personalized budget that helps you save what you need to handle the new costs of homeownership. So now that you have a better idea of what renting vs. buying a house entails, you can make a more informed decision of which is right for your lifestyle and your finances. But this is just the first chapter in our home buying series, where we’ll discuss first time home buying resources, steps to buying a house, and more. So if you’re thinking of making the switch to becoming a homeowner, this series is for you. In the next chapter, we’ll be covering important resources for first-time home buyers. Sources: iProperty Management | Statista | The White House | U.S. Census Bureau Previous Post 10 Minimalist Lifestyle Tips to De-Stress and Save Money Written by Mint Mint is passionate about helping you to achieve financial goals through education and with powerful tools, personalized insights, and much more. More from Mint Browse Related Articles Mint App News Intuit Credit Karma welcomes all Minters! Retirement 101 5 Things the SECURE 2.0 Act changes about retirement Home Buying 101 What Are Homeowners Association (HOA) Fees and What Do … Financial Planning What Are Tax Deductions and Credits? 20 Ways To Save on… Financial Planning What Is Income Tax and How Is It Calculated? Investing 101 The 15 Best Investments for 2023 Investing 101 How To Buy Stocks: A Beginner’s Guide Investing 101 What Is Real Estate Wholesaling? Life What Is A Brushing Scam? Financial Planning WTFinance: Annuities vs Life Insurance