When searching for a home, many circle back to the question of whether they should continue renting or if they use that money towards buying a home. Although buying has always been favored, I believe that it is a much more complex question than it seems, and there is no one size fits all approach to answering this question. There are numerous factors to consider when making this decision for yourself. Your finances, lifestyle, work situation, and long-term plans should all weigh-in to this decision.

Affordability vs Equity

The main difference between renting or buying is “equity.” Put simply, equity is how much of something you own. In a typical apartment rental scenario, you do not put any money towards equity, meaning no matter how much time you spend renting and how much money you spend, you won’t be left with any ownership in the home, which of course isn’t favorable. However, the monthly rent payment is typically much cheaper than a mortgage payment, and homeownership has many other expenses such as maintenance, insurance, property taxes, etc. that all must be factored in. Overall, renting is much more inexpensive which is why many go towards renting, especially early on in their careers.

On the other hand, when you buy a property, you are building equity, or ownership, in the property. Each monthly mortgage payment you make puts more money towards your ownership of the house, so at the end of the term, you’re left with a property that has most likely increased in value. This means that if enough time has passed and you were to sell your home, you’re likely to sell for much more than you originally bought it for, getting a positive return on the investment. Equity is always the favorable option, but unfortunately, it’s not always easy to be able to afford the monthly payments in addition to the other homeownership expenses to make that a reality.

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Short Term and Long Term Goals

While finances are a very important factor to consider, I would put a huge emphasis on your long-term goals when making the decision of buying or renting. Homeownership locks you into a specific area for a long-period of time. Therefore, your time-frame for living in that area can make a huge difference in the decision. Here are some questions to ask yourself:

• How long have I been at this job? Do I feel I have job-security here?
• If I lose my job, is this area a good place to find a replacement?
• Do I plan on being in this area for longer than 3-5 years?
• Am I planning on growing my family in the next 3-5 years? If I do, will I have enough room?

Based on these questions, you will be able to get a good grasp of your goals in the area. If you feel being in the area is much more of a “temporary” thing, then it may be better to rent. Alternatively, if you see yourself here long-term and are able to purchase a home that compensates for your future plans, then buying a home may be the right option for you.

Final Thoughts

Buying or selling is a personal question with many nuances. These are just a few things to get the gears turning, but there are many other factors to take into consideration when making this decision. I highly recommend speaking to your real estate agent about your thoughts, they will be able to walk you through the decision-making process and share their experience with you. Overall, it’s important to give yourself the time to go over all of the different factors involved and get a good understanding of your future plans and life goals.