Renting vs. Buying: Which Should You Choose?

It's more than just a difference in equity

A person in overalls writes a to-do list while packing boxes

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Renting and buying are your two main options when it comes to obtaining a living space. While renting is less capital-intensive and gives you the freedom to move when you please, buying a home will help you build equity and wealth.

Whether you’d prefer to rent or buy, there are many financial implications and lifestyle factors you need to consider. Keep reading to learn more about them.

What's the Difference Between Renting and Buying?

Renting Buying
Costs Cheaper upfront costs, and deposits may be returned Higher upfront and ongoing costs
Wealth No opportunity for wealth accumulation Opportunity for wealth accumulation and tax breaks
Responsibility The renter is not responsible for building The buyer is responsible for maintaining the home
Flexibility Freedom to easily move apartments Freedom to remodel at will


One of the biggest advantages of renting is that you don’t have the same ongoing costs you would as a homeowner. On top of mortgage payments, a homeowner also has to pay property taxes, and for insurance, routine maintenance, and possible upgrades, if needed.

The cost of your application fee or security deposit is also generally much lower than the total amount you’ll pay in the process of buying a home. There are many costs associated with closing a home purchase. The average down payment is 12%, and closing costs typically run from about 2% to 7% of the purchase price, with the average being around 3%.


While renters may get their security deposit back, they won’t see a large portion of their renting costs ever again.

With homeownership, you build equity. As you pay down your mortgage balance, the difference between your remaining loan balance and your home value becomes your equity in the home. Not only does the equity add to your net worth, but you can also take advantage of it later with a home equity loan, HELOC, or just in cash when you’re ready to sell the house.

In some cases, homeowners can also reduce their tax bills with a mortgage credit certificate. Because the amount of mortgage interest you pay goes down over time, so does the tax deduction. In addition, you must itemize your taxes to take advantage of the mortgage interest deduction.


Generally, a renter's landlord or superintendent will handle the bulk of the maintenance and repair needs. In most cases, though, if you are the one who caused damage to a specific appliance, the landlord will require you to pay for the damage.

Homeowners, on the other hand, have full responsibility for their homes. If something needs to be fixed, then the homeowner must either do it themselves or pay someone else to do it.


Renting is a more flexible option for moving. If your job changes or you simply want to move to a new place, it’s just a matter of putting in notice with your landlord based on the requirements of your lease. Note that some rental agreements outline a lease-breaking fee if you choose to move before the end of your lease. Breaking a lease can affect your credit score if you fail to pay the required fee.

Renting is far less flexible when it comes to making changes around the home.

Depending on your rental agreement, you may not be allowed to make any permanent cosmetic changes to your apartment or rental home. This is typically detailed in the original lease.

You may also live closer to your neighbors. In a building with units, you share much of your living space. If the walls are thin, you may hear your neighbors often, even when they're not making much noise. You will not have the option to remodel the unit with thicker walls.

Homeowners have creative freedom over their living space. Should you wish to paint, redesign, or renovate, you can do so at your leisure without the approval of a landlord. If the neighbors are too loud, you can soundproof your home. If you want more privacy, you can build a fence or plant privacy hedges.

While homeowners have the flexibility to alter their existing living space, they are largely stuck with that space. If you want to move or your job changes, it might not be as easy to pick up and leave as it would be if you rented. You'd have to sell or rent your home—or leave it vacant at times—which could leave you responsible for a mortgage on two properties in two different locations.

Which Is Right for You?

While there are pros and cons to both renting and homeownership, the decision is intensely personal and involves much more than just your current financial state. Consider the following aspects before choosing to rent or buy.

Buying a Home Requires Financial Readiness

Buying a home will be one of the biggest financial commitments that you'll make in your life. You'll want to go into it as prepared as possible. Before buying a home, you should have:

  • A steady, stable income
  • A reasonable down payment
  • Savings for home repairs
  • A healthy credit score
  • A manageable amount of debt

Also, if you have a partner or family to think about, be sure to consider their needs and wants, too.

Are You Willing To Commit to a Single Location?

Purchasing a home comes with a high amount of upfront expenses. It will take several years to break even on your spending. Staying in your home longer gives you the best chance to gain equity as you pay down your balance and the value of your home increases, although there is no guarantee your home value will increase.

Being willing to stay in your home longer is important for maintaining any equity you've gained. If you have to sell your home within the first few years of ownership, you may lose money after covering the transaction costs.

Does Buying Make Sense in Your Local Real Estate Market?

Buying isn't always cheaper than renting an apartment, especially when you factor in insurance, property taxes, maintenance, and repairs that will be needed for your home. It really depends on your local real estate market.

If rents are cheaper where you're considering your home purchase, it may make sense to rent for a while longer to save up a larger down payment, which will help you take out a smaller mortgage and have a lower monthly payment when you're ready to buy.

You can use a rent vs. buy calculator to help you crunch the numbers on whether renting or buying is better for you.

Do You Desire Homeownership?

Despite homeownership being touted as the American dream, not everyone wants the responsibility and commitment of owning a home. There's no guarantee that home values will rise, or that they'll rise above inflation, so there may not be a financial benefit to owning a home.

Current Market Trends

As of June 2021, the housing market is somewhat explosive, in part due to low interest rates and a higher demand than supply. Within the seven-day period ending March 14, for example, 61% of homes under contract had sold in two weeks or less. The speed of sales has also helped inspire rising prices, with homes selling for a median, all-time high of $330,250, at an average of 100% the asking price, according to Redfin.

Meanwhile, as the price to buy a home increases, the cost of rent may, too, according to Redfin’s recent predictions of the COVID-19 pandemic’s impact on the housing market. This is especially true of short-term rentals, and rentals within popular migration cities such as Atlanta and Austin.

Buying vs. Renting Among Younger Generations

It’s important to take a look at how different generations are approaching the market.

Millennials—those currently ages 22 through 40—accounted for the largest share of home sales in 2020, at 37% of buyers, according to an annual trend report from the National Association of Realtors (NAR). Millennials are the largest generation of the U.S. population, though, and are still purchasing homes at a lower rate than previous generations.

By the age of 30, 42% of millennials own homes, compared to 48% of Gen Xers and 51% of those in the baby-boom generation, according to a report from Apartment List. There is a general hesitation from many millennials to own a home, the report suggests. In 2020, 18% of renters in this generation said they plan to rent forever—up for the third consecutive year from 12% in 2019.

Minority homeownership is a huge problem of note in the U.S. housing market. By age 30, according to a report from Apartment List, the white millennial homeownership rate (51%) is already two-and-a-half times that of Black millennials (20%).

It’s hard to measure how the newest generation, Gen Z, will feel about the housing market. The annual trend report from NAR suggests that it’s too soon to gauge, as buyers under the age of 21 made up only 2% of respondents. However, a recent survey from Freddie Mac reports that while they understand the financial challenges ahead of them, 86% of Gen Zers aspire to buy a home someday.

The Bottom Line

There are arguments for both renting and buying, yet recent trends point toward a higher interest in homeownership among younger generations.

However, trends shouldn’t dictate your choice. The decision to rent or buy is a personal one. Are you ready to stick with one location and take responsibility for the property in exchange for equity in a home? Or would you rather sacrifice equity to give yourself the freedom to move when you want?

Carefully consider all your finances, goals, and needs as an individual or family before deciding one way or another.