By: Meghan Monson, Homeownership Programs Coordinator

Choosing whether to pursue homeownership can be difficult because there’s no “one size fits all” approach to buying a home. There are many calculators online that can tell you if renting or buying will save you more money over time, but they often don’t factor in the personal reasons that convince people to rent or buy. In this post, we will look at renting versus buying in terms of flexibility, responsibility, and investment opportunity.

Flexibility, in terms of being able to move to a different home or location, greatly reduces when you become a homeowner. Because there are costs associated with buying a home that are separate from the cost of the home itself, it is not practical to move frequently while owning. Unlike renting, which may have a minimal application fee, the costs of buying a home are significant relative to the purchase price of the home. Closing costs include the lender’s fees, attorney’s fees, title insurance, as well as prepaid and escrowed homeowner’s insurance and taxes. If you were to buy your home and then sell it without having built enough equity, it is possible that you will not make any money in the transaction, and you could lose money. Therefore, it is advisable to only purchase if you are in a situation where you can forego some of the flexibility of moving often. Freddie Mac recommends that you plan to live in a purchased home for at least 5 years.

It is well known that being a homeowner means more responsibility. As a homeowner, you will be accountable for maintaining your home in the condition required by your local municipality or your condo/homeowner’s association. Houses don’t take care of themselves.; they require a significant (in terms of cost and time) input from the owner to be maintained.

The type of property you buy will determine just how much responsibility you will have. There is a spectrum of responsibility: on one side with the least responsibility is renting. The form of homeownership with the least responsibility is condo ownership, where often there is a condo association in place to maintain the building and common areas. If you want to be a homeowner and don’t like the idea of maintaining a yard, this option is probably the best for you. Next on the spectrum is single family property ownership, in which you own the whole building or dwelling unit. The ownership option with the most responsibility is multi-family ownership, in which you are responsible for a building, its land, and all the units in the building. In multi-family ownership, you become a landlord and must maintain your own dwelling unit in addition to the dwelling units your tenants. From least responsibility to most responsibility is renting, condo ownership, single family ownership, then multi-family ownership.

Lastly, the investment opportunity of homeownership is often a major factor that persuades people to buy rather than rent. On average, homeowners have much greater net worth than renters. Owning a home is a sort of forced savings plan, where your monthly principal and interest pays for an asset that will ideally increase in value over time. When it comes time to sell, you will ideally make a profit because your home is worth more than it was when you bought it. This stands in contrast to renting, in which your monthly rent payment usually helps build your landlord’s equity in the property. Considering this, more renters might prefer to be homeowners but are not able to overcome the many barriers to homeownership that most often have to do with upfront costs. Some might simply prefer to make their investments outside of their home because they have a different investment strategy.

If you are prepared to remain in one place for at least several years, you understand and are ready to accept the responsibility of maintaining a property, and part of your long-term investment strategy includes owning a home, then you are likely a good candidate for buying. If any of these boxes are unchecked for you, then it might indicate that you are comfortable renting, at least for now.