When to Rent vs. Buy a House

Buying a home is usually more expensive up front, but it’s an investment that has the potential to gain value in the future.

5 min read

To rent or to buy? It’s a big decision and a common conundrum that most adults will struggle with at least once in their lives. No one can tell you whether renting or buying a home is best for you, although many people will certainly try.

We understand that everyone is on a unique financial journey, and we’re here to provide you the necessary tools and knowledge to help you reach your goals. In that sense, we’re not going to tell you what you should do regarding future living plans, but rather show you what you could do. We want to give  you all the possibilities so that you can figure out the path that’s right for you. 

Whether you rent or own your home can affect your finances in major ways. Buying a home is usually more expensive up front, but it’s an investment that has the potential to gain value in the future. Homeowners also enjoy special tax deductions, but some prefer the freedom and greater mobility of renting. Renters also don’t have to pay for repairs and maintenance, or certain utilities. 

Neither renting nor buying is inherently better — it really comes down to what’s best for you, and that often changes over time. 

Pros:

  • Freedom. You’re not locked into living in one location or even one state. After your lease is up, you can go anywhere you want.

  • Low startup costs. Renting a home is less expensive up front compared to buying a home, making it easier (and quicker) to move in. Homebuyers must pay a down payment and may have other upfront costs, while most renters usually only need a deposit along with first and last month’s rent.

  • Low maintenance costs. If your plumbing stops working, your landlord has to pay for and in many cases arrange any repairs (and deal with the headache).

  • Variety. You can test different types of living situations to see which one is right for you before you commit. Sometimes that dream home in the city turns out to be a noisy nightmare.

Cons:

  • Rent increases. It can be hard to budget when your rent keeps going up every year. And because you’re already living somewhere, you may be tempted to stay and pay more than you can really afford just so you don’t have to move.

  • Insurance expenses. Even if you lease a small apartment, you’ll probably need to purchase renter’s insurance to cover potential damages and theft.

  • Less personalization. When you rent a home,  you are limited in the kinds of updates you can make to your living space to make it feel your own. You still have some options for customizing it, but larger updates like retiling the bathroom aren’t usually an option as a renter.

 Pros:

  • Equity. Buying a home is an investment. Your overall wealth increases as you pay down your mortgage and your property’s value increases over time.

  • Personalization. Do you want a purple kitchen or a backyard full of roses? When you own your home, you can customize it however you want.

  • Tax deductions. If you itemize your tax deductions, you can deduct property taxes, mortgage interest, and several other expenses associated with owning a home.

Cons:

  • Taxes. When you own property, you have to pay additional taxes. Depending on the state you live in and the value of your home, property taxes may cost thousands of dollars each year.

  • Expense. On top of the challenge of having to come up with a down payment, monthly mortgage payments can sometimes be more expensive than renting. Homeowners may also have to shell out for maintenance, repairs, HOA fees, and insurance.

  • Income. If you don’t make enough money today to qualify for the house of your dreams, you may have to narrow your search criteria and look outside of your desired area to find an option that is affordable. Plus, if you have a lower credit score, it can be harder to get a loan and may make the home buying process more trouble than it’s worth.

Unfortunately, there’s no simple answer to this question because numerous factors come into play and every person’s situation is unique. Start by taking an honest look at your finances. With the N26 app, you can see a simple visual breakdown of your savings and expenses with just a few swipes. Which of the following statements fits your current circumstances the best?

  • You want the freedom and flexibility to be able to move whenever you want.

  • You’re still deciding on a career path and testing out different jobs.

  • You frequently stress about finances.

  • Your credit score could use a little work.

  • You plan on living in the same place for the next four or five years (at least).

  • You feel like you could deal with routine home repairs and maintenance issues.

  • You have an emergency fund and a fairly stable source of income.

  • Your credit score is at least 650.


Whether you want to rent or buy—do it your way with N26.

From a sleek downtown loft to a classic victorian in the suburbs, N26 can help you begin to save for the home you want. Enjoy convenient savings tools like Spaces that make it easy to visualize, track, and achieve your goals. Stash away money for a rent deposit or down payment. Instantly transfer funds and watch your savings grow. 

Discover how simple it can be to manage your finances with banking that is fast, flexible, and transparent. Open your N26 account today.

The N26 account is offered by Axos Bank®, Member FDIC. N26 Inc. is a service provider of Axos Bank. All deposit accounts of the same ownership and/or vesting held at Axos Bank are combined and insured under the same FDIC Certificate 35546. All deposit accounts through Axos Bank brands are not separately insured by the FDIC from other deposit accounts held with the same ownership and/or vesting at Axos Bank. The N26 Visa® Debit Card is issued by Axos Bank pursuant to a license by Visa U.S.A. Inc. The N26 Visa Debit Card may be used everywhere Visa debit cards are accepted.

By N26

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