How Renting Can Be A Better Financial Decision Than Buying

Owning a home is often viewed as the American Dream. Unfortunately, not everyone can achieve that dream, and some people are better off not trying. At this point in life, depending on your individual situation, renting might be a better choice than buying your own home. Don't look at renting as an inferior option. Many rentals, including detached one-family houses, make great long-term homes.

High Interest Rates

High interest rates can turn a moderately priced home into an excessive monthly payment. If you have moderate or bad credit and are able to secure a mortgage, the interest rate will likely be far too high to afford. Instead of paying too much in interest, rent and save the difference.

Costs of Home Ownership

Some people don't realize how much owning a home costs until they move in. When you rent, you can call your landlord to fix things. If they refuse to make necessary upgrades, you can move to another rental with better landlords that take care of your home. If you own the house, you're responsible for fixing leaks, changing fixtures, buying a new refrigerator, mowing the lawn, plowing the snow and upgrading a severely outdated kitchen or bathroom.

Add up all the extra costs, $40 here, $1,500 there, and the costs build up over time. Even if the rent you pay is a little more than the mortgage payment and property taxes as a homeowner, the extra costs can quickly cap the costs of a year's rent.


Some people buy a house and stay there for decades. Others have to move for new jobs, relocation, helping ailing family members and other reasons. When you own a home, you have to go through the trouble of putting the house up for sale and getting it sold as soon as possible. In the existing poor economy, houses can sit on the market for years. If you do sell it in a rush, you could end up with a huge loss on what you paid for the house.

You don't have to worry about this with a rental. The worst you'd lose is a few months of rent if you leave early. Some landlords are very accommodating and allow you to break a lease early. You might only lose the security. Compare that to tens of thousands of dollars lost on a house sale. If you know you could move at any time or you're unsure about your living arrangements, renting is a better option. It will cost less in the long run.


Some individuals argue that even if owning a home costs more, you're building equity. It's true. If you pay off your mortgage on time, eventually you won't have a mortgage at all, and your house will still have value. The only cost will be property taxes, homeowners insurance, repairs, maintenance and utilities. 

Buying a home is 'forced savings'. However, once you pay your house off, you can't have that money back unless you sell your home. You have to live somewhere. Chances are you didn't pay off your mortgage so that you could take out another one. 
There will always be the option to take out an equity loan on your home, but it's not liquid money in the bank.

Many individuals and families will decide that home ownership is right for them, and it will work out great. However, renting is also a great option for a solid, money-saving living experience. Don't rush into owning a home if you're not ready.


  1. I agree it's a forced savings plan, and if you have a home equity line of credit, you do have that money available.
    But as you discussed, having that much of your net worth tied up in an asset that is not producing an income is a bummer.

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