Explore Major Purchases
The advantages of buying vs. renting
If you're a first time homebuyer, then the process can seem overwhelming. This video series, presented by Chase Home Lending, translates relatable experiences into tips and tools that equip you for every step of your homebuying journey.
Deciding whether to buy or rent a home is a big financial decision. The choice depends on many factors, including your future plans, financial situation and lifestyle. Here are some key things to consider:
Look at your lifestyle
If you're going to be living in the home for just one or two years, you probably shouldn't buy. If your job is not secure or there are changes on the horizon, it's best to wait. You want to be secure financially, and you want to make sure that you're going to be able to sustain the monthly payments and maintain the home.
To help you decide what is best for you, here are some potential costs of both choices, as well as pros and cons of owning versus renting.
Owning: A down payment is the first step towards owning a home. Other costs, such as a home appraisal, homeowners insurance, closing costs and moving expenses are extra and necessary.
Renting: The costs are lower and usually begin with an application fee, a security deposit, first and sometimes last month's rent. There are also moving expenses and, possibly, a broker's fee.
Owning: There are mortgage payments, homeowners association fees if the home is in a community regulated by a homeowners association, and possibly, private mortgage insurance (PMI). PMI should not be confused with homeowners insurance but is a requirement for certain loan types and when the homebuyer pays less than a required 20% down payment.
Renting: There are monthly rental payments, renters insurance, parking fees, if applicable, utilities (some utility costs may be included in the rent), and laundry fees.
Owning: Owning offers the freedom to personalize and renovate the property. In many community associations, fees go toward exterior maintenance, including snow removal and lawn care.
Renting: There's no responsibility for outside maintenance. Renters are responsible for minor issues, such as replacing filters in heating or cooling systems. The landlord bears most of the responsibility for making repairs.
Owning: Stable housing, sense of community, privacy, extra indoor and outdoor space, access to amenities such as swimming pools and clubhouses, at some community associations.
Renting: Renters have the flexibility to move when their lease is up.
Owning: A home typically increases in value, builds equity and provides a retirement nest egg for the future. When you buy a house, plan on staying in it for at least five years to recoup the initial costs of the purchase.
Renting: No equity.
Owning: Home owners may be able to deduct the cost of mortgage interest, property taxes and points you pay to secure a loan. (Of course, check with your tax advisor.)
Renting: Some states offer tax credit programs for renters, mostly aimed at low-income or elderly residents.
Brenda Richardson is a Chase News contributor. Her work has appeared in the Chicago Tribune and Washington Post.