Please enable JavaScript to view the comments powered by Disqus.

Should I Rent or Should I Buy?

Should I Rent or Should I Buy?

Editorial Disclosure: Editorial content, including card comparisons and card reviews are not provided or commissioned by the credit card issuer. Opinions expressed here are the author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. may be compensated through Affiliate Programs for referrals.

• Updated: July 13, 2018

If you’re a millennial then you’ve given some thought about whether you want to rent or buy the next place you live in. With so much to consider it’s hard to break it all down. After all, questions like, when is a good time for me? Or, can I even afford a home? Are difficult to answer. We want to help you get them right by providing you with the factors you should consider, and the tools necessary to feel empowered in your decision. Without further ado let’s take a look at the most important factors when considering an old but always relevant question, should I rent or should I buy?
Keep Reading: 6 Life Events That Can Affect Your Credit


Rent – When it comes to expenses, or the cost of living outside of your monthly payment, renting comes up as a winner. If your dishwasher breaks your landlord picks up the tab. Likewise for any other appliance, plumbing, or structural issue. That means you don’t have to keep emergency funds for the unexpected when it comes to your living situation. It’s also time consuming and it costs a lot of money to organize labor, shop for the best deal, and hire professionals to perform maintenance.

Buy – Expenses come up constantly when dealing with a home purchase, from start to finish. Let’s revisit the scenario when your dishwasher breaks. You’ll have to pay a pretty penny to replace it. That’s why experts say it is imperative to keep emergency funds on the ready. There will always be an expense that comes up monthly, yearly, or once a decade. On the flip side, when something fails that will usually prompt you to make an improvement. These add up and equate to a higher value for your home.

 Tip – DIY! If you’re a jack of all trades or have skills with your hands, do yourself a favor and do it yourself. Even if you don’t have knowledge of how to fix things YouTube is making home improvement and repair possible even for the layman by providing instructional “how to” videos. Look up drywall repair and see for yourself.

The moment you start to move, whether renting or buying, you incur some costs. Both renting and buying share the cost of moving. If you rent you probably paid a damage deposit that you might get back (but probably not all of it). If you bought then you paid a substantial amount for closing costs and your down payment. This is probably a lot more than your damage deposit, but also consider that your down payment just bought you equity in your biggest investment. It translates to instant savings.
Related: Why You Need An Emergency Savings Fund


Let’s talk a little bit more about savings when it comes to renting versus buying a home. There are savings either way but there are very different reasons. When buying it gets complicated and we’ll show you that there is a lot to consider.

Rent – We already discussed savings in the form of your landlord picks up the tab when something requires attention. The fact is that renting is usually cheaper for the first few years (we’ll show you an example in a moment). To add to that, if your rent is less than a potential mortgage payment then you can use that extra cash for savings, investments, or retirement.

Buy – A moment ago we mentioned a word that is very important to home owners: “equity.” Every payment that you make, whether it’s your down payment or your monthly mortgage payment, you’re increasing your equity in your home. When making your monthly payment some of it is going toward the principle balance of your mortgage. This means you’re gaining equity every month you live in your home. There’s just no comparison for this advantage when put up against renting.

TOOL – To calculate how much of your monthly mortgage payment is going to principle and interest you’ll need to know the mortgage balance. For our example we’ll say it’s $250,000. If that mortgage is a 30 year mortgage fixed at 4.5%, then you’ll end up with a monthly payment of $1305, and $555 will go toward your principle balance. Instant equity! Use Excel functions PMT, IPMT, and PPMT in lieu of equation A=P(1+rt), where A is the final investment value, P is the principle balance of your mortgage, r is the interest rate, and t is how many years for the life of the mortgage. The Excel formula is much easier.


When looking back on life with the luxury of hindsight we realize that timing plays a crucial role in our decision making. Since hindsight doesn’t play a role in the decisions we make in the present, let’s look at what considerations do play a role if you’re asking, is this the right time to buy?

Rent – For the person who is unsure where they’ll live in the next few years, renting is probably your best option. Renting affords you the advantage of being able to uproot and move to an area closer to your job. It’s easier to move to a different part of the country, or maybe a fun location like near the beach or downtown in a major city. Rent payments and housing prices are high in these areas. You might not want to stick around too long.

TOOLS – Now is a good time to talk about where housing prices are historically, because that will play a role in the timing of your decision. It’s no question, housing prices are high right now. The housing crash that fueled the Great Recession was an anomaly, historically speaking. The data suggests that housing prices will continue to rise for the foreseeable future. However, “corrections” to the market might occur, and when housing prices take a dip the savvy potential home buyer will jump at the opportunity. That’s why we recommend checking out and to monitor the housing market. They give you the value of homes anywhere in the US (and beyond), graph historical charts, and offer tools to help in your decision. For convenience check out their mobile apps too.

Buy – The cost of purchasing a home and moving is an important factor to consider when thinking about how long you plan on living in your home. It’s expensive to sell a home. Real Estate agents make a lot of money off the sale of your home. That’s money that you’re paying. Not to mention that if you buy again you’ll have to pay the closing costs for that transaction. The flip side is that you will probably make a profit off of selling your home. The point is the more buying and selling you do, whether you’re savvy or not, the more fees you’ll pay.

TOOLS – When considering the savings, expenses, and the timing of your decision the number you should pay the most attention to is your breakeven point. Eventually, you’re going to be saving money because you chose to buy your home. It’s just a question of when that occurs. Typically, experts calculate the breakeven point at about five to seven years. To find out for yourself use this rent versus buy tool to calculate your breakeven point.

Rent vs Buy

With all of these variables in mind, it’s time to create some examples that will show you when it’s worth it to rent versus buy. We’ll use the tools we provided such as the rent versus buy tool above, and then plug in the median home prices weighed against average rent costs of three major cities. These figures are provided by or, and respectively. Plug in your own rent amount and the value of the home you have your eye on. You’ll find out for yourself if you can afford it and how long it will take for you to save money.
ATLANTA (area code 30331) –
Median home price = $184,900
Average apartment rent cost = $1,590
Breakeven point = 2 years
LOS ANGELES (area code 90068) –
Median home price = $575,000
Average apartment rent cost = $2,614
Breakeven Point = 5 years
SEATTLE (area code 98118) –
Median home price = $592,200
Average apartment rent cost = $2,154
Breakeven point = 8 years
Tool – For the really brave and knowledgeable check out this handy tool. It takes into account far more considerations and thus gives a far more complex answer.
You probably get the sense that asking if renting or buying is better the answer is hard to come by. And that’s actually a good place to start. This is a decision that requires a lot of care. Weighing all the pros and cons shows that you’re ready to join the ranks of 87 million homeowners in the United States. Just consider the right factors and use the right tools to feel confident in your decision. We provided some that we hope help you make the best decision when asking, should I rent or should I buy?

We think you'll also enjoy
Senior asian couple
5 Ways Seniors Can Keep Earning Money During Retirement
Double exposure man
What to Expect from Android Pay?
Discover header photo
Why You Need a Credit Card With No Foreign Transaction Fees


We want to hear from you and encourage a lively discussion among our users. Please help our site stay clean and safe by following our posting guidelines, and avoid disclosing any personal information such as phone numbers or bank account information.

The comments posted below are not provided, reviewed or approved by the card issuers or advertisers. Additionally the card issuer does not assume responsibility to ensure that all posts and/or questions are answered.