The Financial Argument for Renting Over Buying

4 min read
April 05, 2016

The Financial Argument for Renting over Buying

Deciding whether you want to buy a home or continue to rent can be a huge decision that relies heavily on your finances and your preferences. While owning a home has almost always been associated with the American Dream, some people are finding that renting is the cheaper, better option for their situation.

There are quite a few reasons why renting may seem more appealing -- and there’s a strong financial argument for renting over buying.

Here’s what you can consider when trying to decide for your own living situation.

Renting Provides More Freedom

If you want to buy a home, staying put for 5 to 7 years is the general rule of thumb to break even once you sell. This accounts for things like your monthly mortgage payment, your initial closing costs, and the cost associated with the selling process.

Homes appreciate slowly -- if at all -- so it takes time to recoup what you put into it.

But many homeowners may lose money in the long run, even if they meet that minimum standard of 5 years in the home before selling. If you’d like to have the option to pick up and move if you don’t like the area, find a new job, or pursue other opportunities, you may want to choose renting an apartment or house instead of buying.

While you can’t necessarily pick up and move any time you want when renting because you likely have a lease, it’s easier to get out of that kind of agreement than put a property up for sale, market it, negotiate with buyers, and close the deal.

Renting and obtaining a short lease is a much more flexible option that will allow you to feel less tied down if your circumstances ever change and you need to move or travel long-term.

Buying Isn’t Always Cheaper

Most people’s reason for buying a house is because it’s ultimately cheaper. If your monthly mortgage adds up to be less than market rent in your area, this is a reasonable motivation to want to buy a house.

Plus, there’s always the urge to avoid “throwing money away.” When you buy, you still have the monthly payment -- but that goes toward equity in your home. You get that money back one day, right?

Maybe. That assumes the market goes up over the time you own your home and that the market is great when you eventually sell.

And depending on where you live, renting could actually be cheaper. Much cheaper, if you consider options like living with roommates.

The best thing to do to settle this side of the argument? Run the numbers for your specific situation. This rent versus buy calculator for the New York Times is really helpful.

Save Money on Upkeep

Home repairs and maintenance are some of the most fluctuating and unexpected expenses homeowners have to deal with. An estimated $2,000 repair or remodel can easily turn out to be double or triple that amount.

As a renter, you don’t have to worry about repairs for your home at all since the landlord will usually take care of everything from installations and upgrades, to painting and landscaping. Letting someone else handle these sometimes erratic and extremely high costs can give your monthly budget a big break.

Yes, There’s More Than Just Money in Renting Over Buying

Some people believe that buying a home is much cheaper than renting while others will argue that renting is cheaper because it excludes a lot of added living expenses that homeowners have to deal with.

Ultimately, there is no right or wrong answer because everyone's situation is different. You can start by running your own numbers and understanding the specifics that apply to your situation -- not someone else’s, and certainly not hypotheticals.

It just helps to understand some of the arguments for renting over buying (and vice versa!) so you know you’re thinking about the situation from all angles.

And yes, there is more to this argument than the numbers. What you care about and your preferences are important here.

How much space do you need? (Be honest!) Are you okay with having neighbors close by or do you want some space? Do you have a lot of debt, or a small emergency fund -- or both? How are rent rates in your area compared to the price of homes? Where do you want to be in 5 years?

All of these factors -- and more -- will play a large role in your ultimate decision.

It’s best to remember that you don’t have to rent or buy forever. Both are options, and in both situations you can change your mind over time. There can be a financial argument for renting over buying, and there’s no rush to make a big purchase.

Rent as long as you need to consider the decision. As with all things in personal finance, at the end of the day the choice is largely a personal one.


Chonce MaddoxAbout the Author: Chonce is a freelance writer who's passionate about helping others get out of debt and work toward financial stability. You can connect with her on her blog,