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  • Writer's pictureThomas Hayes

Is Buying a Home More Financially Beneficial Than Renting?

The age-old debate of whether to buy a home or to rent continues to challenge many prospective homeowners. This question has become even more pressing in recent years with home prices and mortgage rates both rising significantly, and pricing many prospective buyers out of the market. Each option comes with its own set of advantages and disadvantages, and the decision ultimately depends on individual circumstances and financial goals.

While there is a lot that goes into the decision to buy a home, most people want to know “Is buying a home more financially beneficial than renting?”. The answer to this question depends on several factors, most importantly how long you plan to stay in the home. So let’s look at the decision from a cost perspective.

There are a variety of variables that need to be considered to calculate the amount of time you need to stay in the home for purchasing to be more financially beneficial than renting. For this example, let’s assume the following

· a $750,000 home with a 20% down payment, and a 30-year mortgage rate of 8% · vs renting for $4000 per month.

The additional variables are laid out below.

In this example, you would break even on home ownership after roughly 6.6 years. This is why the time you plan to stay in the home, and the monthly rent you are currently paying are such important factors. If you plan to stay in your home for more than 7 years, then it likely makes sense to buy in the scenario above. However, if your cost of renting a comparable property is slightly lower it can meaningfully change the equation. In the example below, the rental cost is assumed to be $3500 per month, instead of $4000 per month, drastically altering the breakeven point.

With the monthly rent reduced to $3500 per month, the breakeven point of buying shifts up to 16.2 years! This flies in the face of the common wisdom that renting is “throwing your money away”. If you have a reasonable monthly rental cost, and an expectation that you don’t plan to stay in the same area for a long period of time, you may want to consider renting as opposed to buying. Each person’s situation is unique when it comes to making the decision to buy or rent. Beyond the financial implications, there are other, more personal factors, that make up the decision. Before making a decision, contact us to have an analysis conducted that takes your personal financial situation into consideration.

PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites included, we make no representation as to the completeness or accuracy of information provided at these web sites. The opinions found therein are those of the author(s) of the article or website.

The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.


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