Is It Better to Be a Homeowner or a Renter? This Guide Will Help You Decide

This diptych shows an apartment complex and a house to represent renting a home versus buying a home.
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Along with choosing a college major and deciding whether to have children, figuring out whether to rent or buy a home is one of the biggest decisions you can make.

It’s easy to make a compelling case for either choice. Renters don’t have to worry about the housing market or mortgages; buyers get tax breaks and a way to invest in their future.

There’s no one right answer because every financial and living situation is unique and people’s priorities change over time.

Whether you’re leaning toward buying a home or renting, there are some important things to consider.

If You’re Thinking of Buying a Home

a sidewalk and a house on a sunny day.
Tina Russell/The Penny Hoarder

Many people dream of buying a home of their own so they have the freedom to decorate, remodel and do basically anything they want to their living space.

But there’s a lot more to buying than finding the perfect kitchen or a huge backyard.

Location, Location, Location

Where you plan to live is a huge factor in whether it makes more sense to rent or buy a home.

“With interest rates still very low in many markets, you may have a lower monthly payment if you buy than if you rent. But sometimes renting is better, especially if you don’t plan to be in the location long,” says Texas Realtor Alice Duffy.

Up-front Costs

A down payment is usually required when you begin the process of purchasing a home. Duffy says the down payment could be as little as 3% of the total cost of the home, but up-front costs don’t stop there.

Duffy recommends buyers get a home inspected for problems before finalizing the deal — something she says costs anywhere from $300 to $1,000.

“You may also need to pay some of the closing costs to set up an escrow account — typically one year of homeowners insurance and three months of property taxes,” says Duffy.

Several websites can help you calculate the numbers to compare the up-front and long-term costs of buying vs. renting. But computer-based algorithms may not provide the most reliable information.

Duffy says Realtors and loan officers are better equipped to find out whether buying or renting is right for you — and their services are free.

Think Outside the Box

If you’re committed to buying a home, but purchasing a single-family home on your own is out of reach, don’t be afraid to get creative.

For instance, people sometimes pool money with friends to buy a home together and share expenses. If you go this route, Duffy recommends you seek the advice of a real estate attorney before committing to a mortgage.

If You’re Thinking of Renting a Home

a house for rent sign along a sidewalk by a street.
Heather Comparetto/The Penny Hoarder

Renters typically don’t have the luxury of decorating their living space with more than furniture and rugs. Forget about putting hooks in the walls to hang your favorite works of art.

On the other hand, renters also don’t have to worry about sudden home maintenance and repair bills.

From down payments to inspections, it takes a lot of cash to purchase a home.

But so does renting. There are plenty of up-front costs to consider, like first and last month’s rent, application charges and pet fees.

If renting a home is more your style, here’s some advice from a couple with a decade of rental experience under their belts.

“All Our Walls Are White.”

Matt and Sarah Jacoby of Gulfport, Florida, have been renters for 12 years.

The housing bubble burst right around the time the Jacobys got married. Rather than buy a house they couldn’t afford, they decided to rent until the housing market sorted itself out.

They’re still waiting.

“Right now the housing market is through the roof, so it still isn’t really a feasible time for us to buy,” says Matt. “If you look at the houses that are on the market now, your money isn’t going nearly as far as it used to.”

The Jacobys’ long-term plans include buying a home, but in the meantime there are a few things they say they love about renting.

Not being saddled with a mortgage, homeowners insurance and property taxes is an attractive benefit for the Jacobys — and so is letting someone else deal with issues that test the patience and tax the wallet of people who own a home.

“If something like an air conditioner breaks and costs $4,000 to fix, I just make a phone call and it’s taken care of,” says Matt. “So you’re not dealing with a lot of the long-term headaches that you deal with if you own versus renting a place.”

The flip side of living in someone else’s house is that you can’t make unilateral changes to the property without permission from the landlord.

“You’re not really able to make the place your own,” says Matt. “You can to an extent, but it has to be very temporary.”

For instance, Sarah says, they aren’t permitted to paint the walls and points out something most renters can sympathize with: “All our walls are white.”

The Jacobys don’t feel pressured by friends or family to invest in a home even though people around them are buying new property and houses.

On the other hand, they say, they do feel a bit of societal pressure to become homeowners.

“Sometimes it feels like society is saying, “Well you guys have been married for almost 12 years; you should at least have a house by now,” says Sarah.

While they’re waiting, they window shop for houses in the area to keep tabs on the housing market.

“We have an idea in our head of what we’re looking for. If we’re able to find the right house in the right location, then we would go for it,” says Matt.             

Drawing on their long rental experience, the Jacobys advise would-be renters to shop around for a great place to rent rather than taking the first home that comes along.

“If you have the luxury of time, use it to find a house you’ll be comfortable in — maybe even one you would want to buy if you could,” says Matt.

Lisa McGreevy owns a home that seems to need a new repair every 10 minutes.