Common
wisdom holds that in the long-term, it's always better to buy a home than to rent.
However, given the changes in how people work and live in the last 20 years, it's
not obvious that buying is necessarily better than renting.
When
is it better to rent than to buy? Financially speaking, the rule of thumb is that
if you don't stay in a home for at least 3 years, you probably won't break even
on the closing expenses incurred while buying it. That is, of course, as long
as you're not speculating that property values will rise dramatically. Given the
high costs of owning a home, it's possible that you will not see the financial
benefits of buying for 5 to 10 years.
Besides some potential
financial advantages, renting a home offers other benefits. For example, renting
relieves you of the risk and headache of maintaining and repairing the structure—if
a pipe bursts, it's not your responsibility. Some people also value the flexibility
it offers—i.e., the freedom to pull up stakes, not having to go through the
process of selling a home. And with lower monthly payments, renting may allow
you to save more for a down payment when you do decide to buy.
You
can use our Buy vs. Rent Tool to compare the financial costs and benefits over
time of buying vs. renting a home.
