Should You Rent or Buy a Home?

The decision to rent or buy a home depends on multiple factors, including upfront costs, long-term expenses, lifestyle preferences and how your financial situation stacks up against the current market conditions. Both buying and renting have advantages and disadvantages.

The Cost of Buying

Buying a home involves larger up-front costs than renting, including a 10 to 20 percent down payment and closing costs. Additional expenses include mortgage interest rates, property taxes, homeowners, and mortgage insurance as well as the cost of repairs and general upkeep, such as landscaping. At the end of a 30-year mortgage term, if you didn’t borrow against the equity, you will no longer have a mortgage payment, but property taxes, homeowners’ insurance, and maintenance costs will still need to be paid.

As of January 8, 2025, the 30-year fixed rate was 7.02% and the APR 7.07%. In many markets the home inventory has increased, which means fewer bidding wars and possibly stable housing prices.

Homeownership does come with financial benefits that renting does not offer, including building equity in the property and long-term appreciation. Because of this, buying a home makes sense if you can afford the costs and if you plan to live in the home for at least ten years. Prior to 2017, homeownership had tax benefits. However, the Tax Cuts & Jobs Act of 2017 reduced this benefit as most people now use standard deductions instead of itemizing.

The Cost of Renting

The median rental price for a  two-bedroom unit has fallen for the past 15 months in a row. Rent prices are now $40 less a month than at their peak in August 2022.¹ Redfin predicts 2025 will be a renter’s market as rents continue to drop due to an increased number of rental units.²

Landlords usually require a one-month security deposit with the first month’s rent, which is a lower entry point then a down payment. In most cases, unless you break something, the cost of renting is the rent, renter’s insurance (which is usually cheaper than homeowners’ insurance), and sometimes utility costs. While landlords can raise the rent with each lease renewal, renters can move to another rental and possibly attain better pricing.  

Renting offers more flexibility, since you only need to commit for the length of the lease. It’s possible for renters to live in places where they could not afford to buy a home. Renters may also gain access to amenities such as pools and fitness rooms for free, which would otherwise be expensive.

Renters do not need to worry about property values decreasing, but they also do not build equity.  Paying rent on time may not help build your credit score unless you pay a monthly fee to allow a reporting agency to track that information. If a renter can afford it, they can receive the greatest benefit by investing the money they would have spent on home maintenance each year.

The downside of renting includes less control over the living space in terms of décor policies and pets. There is less stability as the landlord may decide to sell the property. There is also the possibility of landlord issues, such as the landlord being difficult or negligent, which can result in problems with maintenance, repairs, and security deposits.

Lifestyle Considerations

Lifestyle preferences also play a significant role in deciding whether you should rent or buy a home.

• Planning to start a family or want to build roots in a community? Buying may be the right option for you.
• Value flexibility? Renting may be your preferred choice since you can move when the lease is up.
• New to the area? Renting might be a good choice, as it is a temporary situation that allows you to decide if the town is right for you.
• Value stability? Buying may be the right choice.
• Are the upfront and maintenance costs of home ownership challenging? Renting may be right for you while you save for buying a home.

There is no right or wrong choice in the rent or buy decision While renting can be more profitable if you invest the money, you would have been spent on home maintenance, it’s also a matter of personal choice and lifestyle.

1. https://www.redfin.com/news/housing-market-predictions-2025/

2. https://www.redfin.com/news/housing-market-predictions-2025/

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