The rent vs. buy debate has been going on for generations and gets pretty heated on the internet. Everyone wants to make a dramatic statement that one or the other is better. This is simply not the case. This choice has to be made when considering all of the different characteristics and circumstances that our lives come with.
Buying
Pros: Buying allows you to build equity and increase your net worth. Eventually, once you’ve paid off your mortgage, you’d have very low housing expenses.
Cons: The cost of buying is much harder to calculate. You’d have to include things like closing cost, repairs, insurance, maintenance, utilities, and anything else that might come up. It is much harder to relocate because you can’t just tell your landlord that you will not renew your lease. You will have to deal with all the details and expenses of selling your home (listing it, finding a realtor, closing costs). Also, don’t forget that you need a 10%-20% down payment for good mortgage terms.
Rent
Pros: You have a set monthly bill and you don’t have to directly pay for insurance or maintenance. And as long as the terms of your lease are not too extreme, it is relatively easy to relocate.
Cons: You are not building equity and you will not own anything after 30 years.
If you want to see the side by side dollar comparison, there are many online rent vs. buy calculators to compare the numbers based on your area. It allows you to see at what point it makes sense to buy, or choose to rent a similar home. Although this calculator is not taking into consideration every factor, it can give you a good starting point for your decision making process.
Other Considerations:
Other things that you will want to consider is how expensive it is to rent in your area. In some areas, real estate is so expensive that it makes sense for most people to rent for a while until they are financially prepared to take on the responsibility and risk of a mortgage. In other areas, the costs for both options are similar and it makes sense to build your equity by owning.
Bottom Line: There is no perfect answer that is right for everyone. You have to analyze your stage of life and your location to find what is right for you. Obviously, the goal for most is to own their house eventually, but sometimes it is wise to not overextend yourself. Do your best to make an educated decision that makes sense for you.