Is It Better to Rent or Buy a House? Financial Experts Explain

While the norms around marriage and kids have long been shifting, the pressure to buy a house can still be pretty strong. However, like every other major life choice, the decision to rent versus buy property deserves careful consideration. You may have heard the common warnings that renting is wasting money or that owning a home is the only way to build wealth.

However, these arguments are conditional, and it's important to cut through the noise to determine what you value most in your life. So is it better to rent or buy a house? We asked personal finance experts to help us navigate the often intimidating process. Keep reading for everything you need to consider and all the tough but necessary questions to ask.

Renting vs. Buying: What's the Difference?

There are many differences between renting and buying a home. First and foremost is the financial cost of a monthly payment. Renting a property doesn't come with the responsibility that homeownership does regarding taxes and property maintenance.

While the dream of owning a home can be beautiful, it doesn't often include all the upkeep and expenses that come with it. "Owning a home comes with more than just the sticker price—things like property taxes, maintenance, and utilities add up," says finance expert Andy Taylor. If you're not ready to be (or interested in being) solely responsible for all the upkeep of your home, including keeping it safe, then continuing to rent may be a better option for you.

Buying a home affords more lifestyle stability while renting gives the flexibility not to be tied to one location. Renting can be seen as a temporary situation, whereas buying a house is a lot more permanent and more complicated to sell (vs. getting out of a lease).

Pros and Cons of Buying a House

If you are ready to buy a home, then you are committing to a more permanent situation financially and taking on more responsibility as a property owner. Review these pros and cons of buying a house before you put in an offer:

Pros of Buying

When you buy a home, you don't have to worry about a rent increase, a penalty for breaking a lease, or relocating yearly when your lease is up. "There is something truly special about your own patch of dirt, being able to paint the walls or install a dog door, that has its own appeal," says Taylor. If you're ready to take on all the less-glamorous aspects that come with this dream, it might be time to think seriously about buying a home.

As a homeowner, you are responsible for paying state and local property taxes that can increase depending on where you live and the work you do on your home. However, you can deduct property taxes from your federal tax return up to a total of $10,000. Depending on your financial situation, this tax deduction could benefit you.

Also, if your goal is to take the most cost-effective route, it's important to compare all the numbers involved. In some cases, purchasing a home can save you money on your monthly expenses. "You may find that what you'll pay on a monthly mortgage is less than what you'd pay in rent for a comparably priced space, even as you're building equity," Taylor says.

Cons of Buying

Purchasing a home costs a lot of money, which you usually pay upfront as a down payment to secure the home. This cost is elevated when you have to pay more than asking, and unfortunately, those costs just aren't feasible for some people. Also, when you own a home, you can expect to maintain your utilities and landscaping, which are added costs not usually expected of you when you rent.

The real estate market is unpredictable, and a return on your investment, including everything you did to enhance the home, may not be the amount you were hoping for if the value of the home decreases. "It all comes down to what you can afford and where you're at in your life," says Taylor.

Pros and Cons of Renting

As you consider if renting is for you, think about the benefits and limitations that come with living in a place that may not be permanent, financially and geographically. Here are some pros and cons of renting a property that you may want to consider:

Pros of Renting

One of the most common arguments for homeownership is the opportunity to build equity with your home. However, owning a home doesn't always offer the best return on your money, so it's important to be smart about your choices—not just follow the most popular trajectory.

For someone who's still saving for a down payment, renting is a good option that affords them a place to live at a lower monthly payment compared to a mortgage payment. Many financial experts challenge the blanket statement that renting is a waste of money. "If [renting] provides you with a roof over your head and a place to live, all of us have to have that," says Marsha Barnes, a certified financial social worker. "So it's definitely not a waste of money."

When you rent, a landlord is responsible for managing the upkeep of the property and fixing any broken items or utilities. Renting is also a great option if you are not sure about putting down roots long-term yet. "Maybe you're exploring a new city or trying out how a new neighborhood feels," says Taylor.

Cons of Renting

If you are renting a property that is not yours, you are unable to own it, meaning you cannot grow wealth over time in the property as an investment. Also, very few landlords will allow you to paint or change anything about the property you are renting, which prevents you from putting your personal design stamp on where you live. You are usually prohibited from doing any home renovations or remodels.

Many rentals do not allow pets in the building, or if they do, they must be a certain size and weight limit, which can be deterring to some people. If you own a car and don't want to worry about parking down the block, that is also an extra fee per month to take into consideration.

Things to Consider to Help You Make a Decision

If you're considering whether to rent or buy your next home, Barnes recommends getting a notepad and writing down some big questions. Do I want to move states in the near future? Do I plan on extending my family? Do I want to work remotely or in person? Here are some other points to consider.

Focus on What You Want

"It's definitely important for us to consider these little soundbites or voices that we hear [about renting versus buying] in the context of what this means for our lifestyle as individuals," Barnes says. In other words, ignore what others say you "should" be doing and focus on what you want. "There is no one-size-fits-all approach to where you live and how you pay for it," says Taylor.

Crunch Some Numbers

That widely circulated argument that renting is throwing away money can also be applied to certain situations of homeownership. The return on investment in the stock market might be averaging at about 10 percent year over year. And the average annual growth in home prices might be 4 percent a year. For the average person who doesn't have a down payment yet, it might make more sense to keep that money invested for the time being.

Assess Your Financial Standing

Once you've decided you're ready to own a home, there are several steps to take. "Getting your finances in order should always be the first step in your home-buying journey, and it's never too early to start," Taylor says.

Taylor recommends that you assess your financial standing: Are you secure in your job? Do you feel confident you're in a position to continue earning a steady income? How's your credit? Are you underwater on high-interest debt?

While the answers to these questions won't determine a definite answer to whether you're ready to buy a home, they can provide a map for what you need to do to become more financially ready. Barnes also suggests calling in help from an expert like a mortgage lender because they can provide you with a checklist and help you create a plan.

Take Your Location Into Account

Housing markets vary. Sometimes, you might be financially ready to own a home—just not in the place you're currently living. For example, you may be more than able to afford a home in a state like Michigan, but the same (or less) amount of real estate could cost you twice as much in a city like New York or Los Angeles.

Conversely, if you're living in an area where the homes are out of your price range, you'll have to consider whether the dream of owning a home is worth moving to a more affordable area or if it's more important to stay where you are and continue renting.

Explore Renting and Buying

Sometimes, you don't have to pick just one option. If you're financially ready to buy a home somewhere but aren't ready to give up your renter lifestyle in a more expensive city, consider buying a property elsewhere and continuing to rent where you are. You can also invest in a vacation home to rent it out, create another income stream for yourself, and build equity in a property while also renting your own home. Buying a property to rent it out can offer a much better return on investment than simply buying a home to live in.