My Perfect Mortgage
Renting vs. Buying Weighing the Pros and Cons
5 minute read
July 5, 2018

Buying vs renting housing usually involves a lot of number crunching. It’s an attempt to find an answer to the question in the numbers. But numbers don’t always answer all the important questions in this kind of debate. In this article, we’re going to focus on lifestyle factors to consider, instead of making it all about money.

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Lifestyle Factors and Preferences that Favor Buying

Any one of the following could be a compelling reason for buying a home. But if two or more apply to your situation, it’s not even a hard decision.

Having a Family

The best evidence here is that virtually anyone who has a family and rents would greatly prefer to own. There are abundant reasons why this is true. First, owning a home gives you more space. In addition to the fact that homes usually have more square footage than apartments, they also often come with basements, garages, attics, and land.

That just better accommodates a family.

The other is a sense of having a permanent place. Children thrive with stability, and that’s easier to come by when you own your home than when you rent. It’s possible for you to raise your children in your home from birth straight through to adulthood.

Income Tax Benefits

Owning a home still offers more potential tax breaks than renting. Not only is there the possibility of an annual tax deduction, but there’s also the potential for a very large capital gain on the property to be tax-free.

Stable Career

If your career is particularly stable, it’s likely you’ll also want a stable home life. That’s more likely by owning a home than by renting one. In fact, the permanence of the home may be more conducive to a stable career. Changes in your housing situation won’t compete with your career.

Making Your Residence into an Investment

Without crunching a lot of numbers, the reality is that owning a home is an investment, renting isn’t. In fact, it’s a thoroughly passive investment at that. You don’t even need to necessarily live in the house. You make your monthly payments, and as you do, your net worth increases steadily.

If you purchase a home for $300,000, with a 10% down payment, you have a 10% investment in the home. 30 years later, after your mortgage has been paid off, you’ll have 100% equity in the home. Plus, if the value of the property rises at all in that timeframe, it only increases the value of your investment.

Lifestyle Factors and Preferences that Favor Renting

Renting isn’t for everyone, but it may be desirable – or even necessary – if one or more of the following situations apply:

Unstable Career

It’s unfortunate that many careers today are less stable than they were a few years ago. The employment landscape is changing to adjust to new economic circumstances. For example, contract employment has become much more common. (NPR recently reported that 20% of the US workforce is now contracting). Though you may be employed at the moment, and even earning a high salary, the situation may be temporary.

If you’re in this kind of situation, you might be better off renting. Should you have to take a lower paying job at the end of the contract term, it may be easier to move to less expensive housing as a renter.

Also, many contract arrangements involve working in different locations. You might be working a current contract job in Florida, but next year accept one in Illinois. Renting is simply more conducive to that kind of career style.

Finding Yourself in the Middle of a Life Transition

While most people crave a stable life, it doesn’t always work out that way. Any number of factors could put you in the middle of a life transition. This could include divorce, a career crisis, the onset of a health condition, or even transitioning from college into a career field.

Any of those situations would put your life in a state of flux. Renting would better enable you to adjust to changing circumstances as they develop. You’d be able to make moves as necessary, without being concerned about selling your home.

The Time Factor - Demanding Career or Very Active Lifestyle

Some people have very demanding careers. That might involve working 60, 70 or 80 hours per week. Others may have very active lifestyles. For example, you may have a lot of non-work activities that take up most of your after-work time. This can include sports, hobbies, volunteer work or any number of other activities.

If you find that either work or personal activities take most of your time, there may not be much left to take care of a home. Also, there may not be much percentage in owning a home you don’t spend much time in.

You Prefer Liquid Assets to Real Assets

Not everyone is comfortable with having their money invested in a home. Some prefer having their money in more liquid assets, including stocks, bonds, and mutual funds. It’s a matter of personal investment preference. If this describes you, and you can save and invest money regularly, you may prefer renting.

This may be more desirable early in your life when you’re trying to build up a basic nest egg or fast-forward retirement savings. But once you do, it’s likely you’ll come around to investing at least some of that money in a home. But when you’re in that early accumulation phase, it just may not be in the plans.

Final Thoughts on Buying vs Renting Housing

Though there are often debates on buying vs renting housing, it’s mostly meaningless. That’s because there are times in your life when renting will make more sense, and times when owning will be the obvious choice.

More than anything, make your housing choice match your current lifestyle and preferences. And as circumstances change, be prepared to shift over to the other.

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.