Renting

Owning

Up-front costs

Generally lower¹

Generally higher²

Monthly housing costs

Generally lower³

Generally higher⁴

Stability of housing costs

With a yearly lease, your rent payment is subject to annual increases. If you rent month to month, your landlord can raise the rent at any time with proper notice (typically 30 days). Tenants insurance premiums are subject to annual increases.

If you choose a fixed-rate mortgage, your monthly payment remains the same throughout the loan's term. Property taxes and homeowner's insurance premiums are subject to annual increases.

Equity (ownership stake in your living quarters)

You have no ownership in your rented space—so you have no potential economic benefit from the space.

Your down payment gives you immediate equity in your home. Your mortgage payments create additional equity that you might eventually be able to borrow against or use to help fund your retirement. Any increases in your home's market value also add to your equity.

Taxes

Rent payments are not deductible.

If you itemize your deductions rather than taking the standard deduction, you can generally deduct property tax (subject to the $10,000 cap on the state and local tax deduction) and mortgage interest. If you make a profit on the sale of your primary residence, you may qualify to keep up to $250,000 of that profit ($500,000 if you file a joint return) without owing any federal income tax on it.

Leverage (using borrowed money to increase your potential return on an investment)

No opportunities for leverage.

You can buy a home with a cash down payment and borrow to pay most of the purchase price. This means you may end up profiting from a market value increase on an asset you haven't fully paid for.

Concerns about property values

You have no vested interest in the long-term value of the property. If the value declines, your net worth won't be affected.

You may lose money on your investment if your home depreciates in value.

Inflation hedge

Not available.

Over long terms historically and on average, homes have appreciated in value faster than the overall inflation rate.

Property maintenance, repairs and improvements

You typically aren't responsible for making repairs to the property. You can leave it to the landlord to fix leaky pipes and deal with similar headaches. However, you may not be allowed to paint or otherwise renovate your space to suit your style or needs.

You're responsible for maintenance and repairs, but you have more flexibility to tailor the property to your needs and style. You can even make capital improvements.

Mobility

Once your lease is up, you can move to a new address if you like.

You can't relocate as spontaneously as you can as a renter.

Risk of losing your place to live

You may have to move before you had planned if the landlord decides to sell the property or otherwise decides not to continue renting to you.

Your mortgage lender may foreclose on your home if you fail to make timely mortgage payments.