Renting vs. buying a home — what’s right for you?

For many, owning a home is both a celebrated milestone in life and a wonderful investment for the future. But with home prices trending higher and mortgage interest rates following suit, homeownership may seem out of reach for some — at least for right now. 

With all that in mind, you may find yourself wondering whether it’s better to buy or to rent, and the answer to that question depends on your own unique circumstances and some careful consideration. Let’s take an objective look at whether buying is the right move or if renting might suit you better — and how your Online Investing account may come into play.

Renting

Renting doesn’t mean you won’t pay a mortgage — it just means you won’t be paying your own mortgage. Often, renting is seen as paying the landlord’s mortgage (and then some). But renting shouldn’t necessarily be equated with throwing away money.

The costs of homeownership can be high, especially when you factor in down payments, closing costs, principal, interest, insurance, taxes, maintenance, utilities, and the fact that anything that breaks is up to you to replace. All those items can add up to a sizeable monthly payment. You must ask yourself what you can afford with the lifestyle you want to live. Maybe your lifestyle includes frequent travel, enjoying all the newest gadgets, or driving fancy new cars — expenses that may not fit with the cost of a mortgage.

The great thing about renting is that you lock in your rent with a contract, and it doesn’t change until the contract is up. You’ll pay that amount plus your renter’s insurance and some utilities — and that’s it. Most rental increases aren’t drastic, and if something breaks, the landlord is on the hook for replacing it.

How does this relate to investing? If you rent, you can forego making a down payment on your home. For example, if you’re looking at a $300,000 home, your down payment could be up to $30,000 if you put down just 10% (and some mortgages require more than that). If you invested that $30,000 over 30 years, at an average rate of return and considering compounding interest, you could have over $172,000 in your Online Investing account.

Buying

Buying a house is an investment as well. You’re investing in a real estate asset that can appreciate over time. This means that if the housing market is favorable, the value of your house may increase, allowing you to build equity and potentially make a profit when you decide to sell.

Homeownership can also come with certain tax benefits. For example, you may be able to deduct mortgage interest and property taxes from your taxable income, potentially reducing your overall tax liability.

Owning a house also provides a sense of stability and security. Unlike renting, where you may have to move frequently due to lease agreements or changes in the rental market, owning a house allows you to establish roots in a community and have a place to call your own. Ownership of a house affords you the freedom to customize and personalize it to your liking too. You can make renovations, paint the walls, and create a space that truly reflects your style and preferences. Renting, on the other hand, often comes with restrictions on what you can do to the property.

If you see homeownership on the horizon for you, you can start working toward that white picket fence American Dream by saving through your Online Investing account. Socking away the money you’re saving by renting should allow you to eventually make that down payment!

Takeaways

Both renting and buying have their advantages, and only you can decide which one is right for you. Perhaps renting is the best move for you now, with homeownership a savings goal for another season of your life. Either way, putting money into your Online Investing account will put you in the right position to have a nest egg ready for wherever you want to put down roots.