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Home is the place where, when you have to go there, they have to take you in.
- Robert Frost
When is it wiser to rent or buy a home?
Let's consider the many issues involved. Then consider your own household's situation, and use some math to justify your decision.
The monthly payments might be comparable, depending upon where you live.
Owning a home requires more cash up-front, more cash set aside for emergency repairs, and the discipline to set aside money monthly for eventual annual property taxes.
Renting a home provides more short-term stability. Your monthly payments might go up once every year, but your costs will not increase suddenly because the roof starts leaking.
Renting a home is usually less expensive overall. Even if the landlord wraps into your rent the overall cost of repairs, insurance, utilities, and taxes you are avoiding the money spent on realtors and closing costs during the purchase.
Renting a home allows more flexibility with weekend time, relocating, and investing.
Owning a home allows more flexibility with pets, yard, decoration, and improvements.
Renting a home should mean you are more active saving for retirement in other ways. For a fair comparison, consider how to invest the money you did not spend on realtors and closing costs. Renters may also need to be more intentional about establishing a credit history.
Owning a home should mean you are more active maintaining your property, and perhaps becoming a part of your community. Owning a home often causes a household to gain more family responsibilities, especially during holidays and emergencies.
Renting a home allows more spontaneity, which some people value.
Owning a home allows putting down roots, which some people value.
Inflation helps people in debt. This is good for home owners. Imagine that during the next decade the dollar becomes worth 10% less, but your earning power and other expenses adjust accordingly. Then the burden of mortgage repayment compared to your budget is also 10% less.
In the U.S., mortgage rates are currently low. Mortgage payments are tax deductible. Inflation rates are quite close to mortgage rates. These factors let mortgage debt be the main way Americans benefit from inflation.
This does not mean mortgage debt is somehow free of burden. It can be either good or bad, depending upon other aspects of the household finances. Is there other debt? Is the mortgage loan leveraging other investments?
The film Segregated by Design helps people understand how housing and lending regulations during the 1900s created injustice that remains in the 2000s. For example, when government agencies helped only White Americans returning from World War II with home ownership, this created a very significant source of wealth to pass down through the generations that non-White American families and neighborhoods do not have.
There is some good news: between 2016 and 2020 the percentage of home ownership by non-White Americans increased by about 5%, bringing the percentage of suburban non-White Americans to parity with their share of the total population. This happened largely because of removing more government regulations.
That history is not part of this math exploration. Establishing economic justice is not simple. The subprime mortgage crisis of 2007 to 2010 revealed the problems caused by simply trying to make home ownership easier for everyone.
In any case, it would inappropriate to conclude this exploration without mentioning that to some extent home ownership can be what is best for a family's future generations, even when it is not the most appropriate for that family today.
