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Should I Rent or Buy a House?

Your friends are buying homes. And you’re wondering if you should stop renting and buy a house too. Your dog wants a yard, your kids want a playground, and you wouldn’t mind a garage and an office.

There’s only one problem: You aren’t sure you can afford it.

Hold up! Deciding whether to rent or buy always comes down to what you can afford. Are you financially ready to buy a house? Or is renting still the smarter option? Let’s compare renting versus buying and find out which is right for you.

Should I Buy a House?

Owning your own home is the American Dream. There’s no doubt that having your own address comes with a lot of satisfaction and pride—it also comes with plenty of extra costs and maintenance. That’s why you want to be absolutely certain you’re ready to buy a house.

How do you know you’re ready? If you can answer yes to the following questions, you’re prepared to take the plunge.

Are you ready to buy?

1. Are you out of debt?

We’re talking no student loans and no consumer debt—nothing!

2. Do you have a full emergency fund saved?

If you got laid off today, could you pay your monthly expenses (like your mortgage and bills) for at least three to six months while looking for work?

3. Do you have enough cash for a 10–20% down payment on a 15-year fixed-rate mortgage?

Having 20% or more means you don’t pay that pesky PMI (private mortgage insurance), which basically protects your lender from going bankrupt if you stop paying your mortgage. To make sure you only get a mortgage you can pay off fast, talk to our friends at Churchill Mortgage.

4. Will your house payment be 25% or less of your monthly take-home pay?

Making sure your mortgage payment (including principal, interest, property taxes, homeowner’s insurance, PMI and HOA fees) is no more than a fourth of your monthly take-home income leaves plenty of room in your budget to achieve other goals, like saving for retirement and putting money aside for your kids’ college funds.

5. Do you plan to stay in the same location for more than three years?

If you’re not crazy about where you live, why would you buy a house there?

Find expert agents to help you buy your home.

If you answered no to any of the above questions, now may not be the right time for you to buy a house. Put your home purchase on hold and focus on your finances until you can answer yes to all of these questions.

But what if I find a good deal?

You found the perfect house, and the sellers are practically giving it away. It just might be the deal of the century. Even though Sallie Mae’s still clutching your pocketbook, you’d be dumb to walk away—right?


With real estate, you come out better off when you buy the right thing at the right time—not by taking advantage of the market. Never buy a house based solely on the market. Buy when you’re financially ready.

Buying Pros and Cons

Even if you’re financially ready to buy a home, you should still be sure your heart is in the purchase. So, before you make your decision, consider the pros and cons of buying a house.

Buying Pros

  • Every payment brings you closer to owning the house. When you pay your rent, that money is spent. Gone. Bye. Not returning. But when you pay your mortgage, you work toward full ownership.
  • You can cash in on appreciation. Your home will most likely increase in value over time depending on the market and how well you take care of it. What you buy for $200,000 today could sell for $260,000 down the road.
  • You have tax advantages. Many of the costs of owning a home—like property taxes—are tax deductible. And if you’re paying off a mortgage, you’ll get to count your mortgage interest as a deduction when you file your tax return.
  • You have the freedom to renovate your house. As the owner of your house, you can do whatever you’d like to it. If you want to paint it hot pink from top to bottom, no landlord can stop you—but your spouse might have something to say about it.
  • You have more privacy. Ricky and Lucy are fighting again—and because the drywall is as thin as a playing card, every tenant can hear them. But having your own house means no Ricky, no Lucy, and no cramped apartment. Just you and peaceful silence. Of course, if your dream home is a beautiful condo in the middle of bright lights and city life, this wouldn’t apply.
  • It’s yours! You have a house! You have the satisfaction of knowing you made the American Dream your reality.

Buying Cons

  • It’s more difficult to travel and relocate. Want to go to Southeast Asia for half a year on a whim? Selling your house isn’t as easy as getting out of your lease, packing your backpack, and getting a one-way ticket to who-knows-where. Same goes for work-related relocations.
  • You have more expenses. Remember how little renter’s insurance cost you? Well, hate to break it to you, but homeowner’s insurance will be a lot more. Combine that with a flood policy, HOA fees, property taxes and higher utility bills, and you’re looking at more monthly expenses.
  • Who’s going to fix the leaky pipe? You are. Or a plumber who you pay. As a homeowner, you’re responsible for the upkeep of your home.

Is buying a house the grown-up thing to do?

Not quite. Taking control of your money is the grown-up thing to do. If you’re 25 and feel like you’re behind the curve because you haven’t bought a house yet, stop worrying.

There’s no reason to rush into a big purchase just because everyone keeps telling you that’s what you’re supposed to do. Real grown-ups know homeownership isn’t the money-smart choice in every situation.

Should I Rent?

First off, let’s get something straight. Renting is not a waste of money. Sure, giving your money to the landlord may mean you’re not investing in homeownership. But you’re paying to live somewhere! And as long as you’re paying to live, your money is being well spent.

Though renting as a way of life is not something we recommend, there are a few situations in which renting is the better option.

When should I rent?

1. You’re paying off debt.

If you have student loans or credit card debt to stomp out, consider your apartment your stomping ground. Unless your rent is devouring too much of your paycheck—in which case you should probably find a cheaper apartment—renting can offer you the opportunity to get out of debt and save.

2. Your job requires you to move around.

If you’re in the military or if you don’t plan to stay long in an area, then you should rent. In most areas, you’ll need to stay in a house for two to three years to make buying worth the investment.

3. You need time to make a plan.

Buying a house is a long-term commitment. As is the case with any relationship, you should think through your decision—acting impulsively is never a smart real estate move. So, if you just got married, graduated from college, or aren’t sure which neighborhood you want to live in, don’t feel guilty about renting until you have a solid plan.

Renting Pros and Cons

Just as home buyers face upsides and downsides to buying, renters have their own set of pros and cons. Here are the most important ones.

Renting Pros

  • You can move with ease. Tired of the city you’re living in? Thinking about taking a year to travel the world? When you rent, you don’t have to stay in the same location. Plus, it’s much easier to get out of a lease than a mortgage.
  • You don’t have to pay for maintenance. If the stove goes kaput and the faucet pipes burst, you don’t have to call the plumber or make a trip to the appliance store. You call the landlord. One of the biggest perks of renting is that you never have to worry about surprise repair costs. And if you have renter’s insurance, you’ll have more peace of mind than a monk.

Renting Cons

  • Rent rates will go up. Even if you found a killer deal in a hot area, inflation, competition and rising property values will cause your rent to go up year after year.
  • You have no financial incentives. No tax deductions. No equity. No rising property value. You’ll never see the money you pay again.
  • You have less freedom to renovate. Even though you think hardwood floors would look great in the bathroom, your landlord may not approve of your renovation idea, especially since they’ll be the one to pay. You have little say in what your place looks like.

Is renting always cheaper?

Whether or not you should rent or buy a house may seem like an apples-to-apples comparison if you look at monthly costs alone. In that case, homeownership often tips the money scale because you pay for maintenance, taxes and homeowner’s insurance on top of your mortgage payment. Long-term costs, however, paint a different picture.

If you’re moving every few years or you’re in a super expensive market (like San Francisco), renting is probably the cheaper option. But if you’re going to stay put for the long haul, you’ll likely make out better buying—especially when you pay off your home.

Rent vs. Buy: Make Your Best Choice With a Pro

Deciding whether or not to buy a house isn’t an easy choice. That’s why it’s smart to partner with a pro who can help you navigate your options.

If you’re looking for a local real estate agent who will offer you trustworthy advice no matter your budget, give our real estate Endorsed Local Providers (ELPs) a try. Our ELPs understand the financial path you’re on and won’t push you to overspend on a house just so they can bring home a bigger commission check.

We only endorse the top agents in your area, so you can trust your ELP to negotiate the best deal on the house that’s right for you.


Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

Buy a House With an Agent Who Serves, Not Sells

Find a Buyer's Agent

Buy a House With an Agent Who Serves, Not Sells.

You need an agent who cares more about you than their commission check.
Find a Buyer's Agent

Buy a House With an Agent Who Serves, Not Sells.

You need an agent who cares more about you than their commission check.
Find a Buyer's Agent