Consumers » Does It Make More Sense to Rent?

Does It Make More Sense to Rent?

For many consumers, renting is a more feasible option than buying a home given their own individual family, work, and financial situation. In general, seriously considering buying a home makes more economic sense for those with a steady job or long-term career plans in the area in which they live and plans to remain in their home for at least 4 to 7 years. When you buy a home you take on some additional expenses that aren't typically part of your rental expenses. These can include property taxes, homeowner's (sometimes called hazard) insurance, maintenance and upkeep, etc. Be sure you're considering all of these costs when determining if buying makes sense for you. Some other things to consider:

• Over the past 10 years, the cost of rental housing in the United States as increased an average of 3 percent per year. That means an apartment or home renting for $1,000 per month will cost more than $1,300 per month in 10 years. If you rent the same home for 10 years, you'd pay $137,567 in rent.


• None of the cost of renting a home will be returned to you. The favorable treatment homeowners receive from the IRS in the form of deductions allowed for mortgage interest, property taxes, and (if applicable) mortgage insurance will all go to your landlord, as will the equity gains from increases in property values over time.


• A large down payment is not necessarily required, especially for first-time buyers using the Federal Housing Administration's (FHA) mortgage program. But don't let the option of putting down a smaller amount of money lead you to believe you can afford a more expensive home. Work with a reputable lender to determine the best loan product for your individual situation.


• The average homeowner has accumulated wealth of more than $180,000, compared to $4,000 for the average renter.

To calculate whether renting or buying is the best financial option for you, use this online calculator courtesy of Ginnie Mae.