With interest rates on the rise, is renting better than buying?

Buying a home is something that we all tend to dream about. It’s something that many of us grow up thinking about, or even imagining: what would it be like to buy a house, maybe with a picket fence and a well-manicured lawn and garden?

But when it comes to buying vs renting a house, there are some definite obstacles standing in the way of home ownership. Especially with the housing market the way it is now (and the way it has been for the past few years). It may seem like the question of “Is it better to buy or rent a home?” is not so much “which is better?” but “which is possible?” 

For the last couple of years, the housing market was booming with such demand that it was impossible to get the materials to build a home and there were waits six or nine months long just to get a new house built. 

Now things have turned on their head, with interest rates going up dramatically so that home prices or, at least, mortgage payments, are out of reach of many people. For some, it may seem that renting is the only option. 

But is that true? Which is better–buy a house or rent?

Renting: The Pros and Cons

When you rent a home you are not building equity in a home, which is seen as the primary reason why you wouldn’t want to rent. There’s also always the worry that the monthly rent is going to increase dramatically, and that the rental property won’t be available in the long term, meaning you can’t put down roots in an area.

But according to Investopedia, the idea that renting is throwing away money every month is a myth. Yes, you’re not building equity in a home, but very often when you’re a homeowner you’re not building equity in a home either. So much depends on the whims of the economy and the financial situation of the entire national housing market. 

One of the pros of renting is that when you sign a lease you know that, for the period of that lease, your monthly payments are going to stay the same. And there’s some comfort in knowing that you’re not going to see a rise in that. Of course, when you negotiate a new lease, you’ll have to agree to new terms, so it’s not perfect, but neither is home ownership. 

In fact, one advantage of renting or leasing is that you’re able to move when the lease is up, make a clean break, and go wherever else you want to go. This is much harder when you’re a homeowner. 

Buying: The Pros and Cons

The benefits of homeownership are many, even if there are drawbacks. For starters, the intangible benefits are considerable. You know that the house belongs to you and that if you want to knock down a wall to renovate the bathroom you can do it, or if you want to tear up some lawn to plant a larger garden, there’s no one to tell you no. 

There are also tangible benefits, which include the possibility of gaining equity, making the home an investment, and perhaps something that will see you through to retirement. There is stability in homeownership.

 Depending on whether you have a fixed-rate mortgage or an adjustable rate, you will know what your monthly mortgage payment is going to be for the life of the loan. You have an end date as to when you’ll pay it off, be it 15 years or 30. In other words, the house is yours, and you have a feeling of calm in that.

That said, there are a lot more financial hoops you have to jump through for both home purchasing and home ownership. When you’re making the decision to buy or rent, you need to factor in mortgage rates, mortgage interest, homeowners’ insurance, property taxes, and closing costs. The paperwork to buy a house is much more extreme than just the simple credit score check that a rental property will typically do.

On the other hand, there are significant tax benefits to buying a home, benefits that renters don’t get. You get the home interest deduction, which can be substantial. 

So Which Is Better? Buying or Renting a House?

Both of them have their pros and cons, but the fact of the matter is that it all depends on your place in life and what matters to you. If you expect that you’re going to be moving in a few years anyway, then you won’t be building any equity in a home purchase and might as well rent. 

If you’ve found your forever home, then you want to lock it in at the best deal possible and stay there until retirement or longer. A home can be a great investment, one of the best and most accessible investments you can ever make. 

View our exclusive listings today!