The Age-Old Question: Rent or Buy a Home?

Are you on the fence about whether or not to purchase a house in your area or to continue to rent? While many people consider purchasing a home to be a long-term investment, there’s a whole lot more to the equation than whether the house purchase would create an asset or a liability for your family. Here are three important factors to consider when deciding whether or not it’s worth investing in a home:

rent or buy

How stable is your job?

If you’re a careful person, the first thing you need to ask yourself how stable your job is and whether or not you anticipate a career change in the near future. If you’re a part time or temporary staff member, investing your nest egg in a home may not be the smartest move. But if you’re established in a career with a regular income and you’re looking to build an asset, investing in a home may save you money over time while building an asset.

How long do you want to live in the area?

The cost-value analysis of renting or buying depends on a number of factors. How expensive is your rent? What rate are you able to finance your home under? For example, if I were to pay a monthly rent of $1400, buying would be better than renting if I planned to stay in that home for at least three years (assuming a home price of $180,000, a 10% downpayment, and a mortgage rate of 5.5%). But if that home were $300,000 under the same circumstances, it would take 12 years for it to be worth it!

If you have the numbers handy, use a mortgage calculator to estimate of how long you’d need to stay in a home before it was saving you money to buy it.

If, on the other hand, you’re open to relocating to pursue a relationship or a job farther from home, renting is a better choice. You may pay the same amount on a monthly basis, but you’ll avoid the one-time fees and the stress of putting a home on the market to resell.

Could you afford to keep the house if you had to move?

A great way to determine if you’re ready to purchase a house is to ask yourself what you’d do if you needed to move quickly and the house couldn’t be sold or rented. Emergencies happen — you may need to relocate to help care for a family member, or accept an opportunity abroad that’s too good to say no to. In these scenarios, it will pay off if you consider your Plan B ahead of time. Purchasing a home in a price range that you could afford even if you needed to relocate would be the safest choice.

Are you on the fence about renting or buying a home? What do you think is the most important factor to consider?

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17 thoughts on “The Age-Old Question: Rent or Buy a Home?

  1. Good point. I’ve been a homeowner since 1999 so you can see what side of the fence that I’m on, though I think each person/family has to make their own decision. It irritates me when I see people say ‘only rent’ or ‘only buy’ because there’s no one-size-fits-all solution.

  2. Job stability is the main reason I have avoided getting a house right now. I feel secure in my position with the company I am at but I’m with one other person in location down in Georgia. The company’s main office is located in Virginia and if I move up at all, I would probably have to move back there. For the time being, I think I’m just going to accumulate money in index funds until I know my location is more secure.

  3. For us, buying has always been the way to go. Both of us like the idea that not long from now, our mortgage will be paid off and that doesn’t happen when you’re renting. Early in my career (many years ago) I was transferred quite frequently with the bank. That wasn’t a good time to buy.

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