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Renting vs. Owning: The Biggest Differences And How They Compare

September 15, 2020


Min Read
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Deciding to rent or own your home is a major decision.

Renting a home provides you with greater flexibility, making it easy to pack up and go. Owning a home offers more stability. It also builds equity over time, which you can later access if you need it. There are clearly substantial differences between renting and owning. They also each have some fairly compelling perks, which can make the decision more challenging if you’re on the fence. Here’s what you need to know about renting vs. owning a home.

Quick Plan


Decide on your location.

It’s not just about the house or apartment, it’s about the location itself.


Be aware of the cost of living.

Regardless of whether you rent or own, you also need to factor in the cost of living.


Ask yourself what you truly want.

Don’t neglect your own happiness. Ultimately, it all boils down to where you feel happiest.

Do you have any home goals?

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Owning a Home: Pros and Cons

Homeownership can be a joy, but it can also present new challenges. Here are some of the benefits and drawbacks to owning your own home.

Pros of Owning

A Sense of Stability

When you own a home, you have a place that’s all yours. Unless you default on your mortgage, you’re not going to be forced to leave suddenly. There’s a sense of community and belonging when you own a home. There’s also a sense of pride.

Greater Equity Over Time

Equity is the difference between what you can sell your home for and how much you owe on your mortgage. You accumulate value as you repay your mortgage. Equity also increases when home values rise—and, as history has shown us, they do rise over the years.

When you build up enough equity, you may be able to take a home equity loan or line of credit against it, which you can then use for home repairs.

Increases in Property Value

Home values may naturally increase over time. Another way to increase the value of your house is to make improvements. While repairs and upgrades cost money, homeownership gives you the freedom to do what you want with the property. Certain improvements can increase its value significantly.

Tax Savings

In many cases, you can deduct mortgage interest and property taxes from your federal and state income taxes, something a first-time homebuyer might not know. If you’ve just purchased the house, some closing costs and discount points may also be tax-deductible.

Fixed Interest Rates

Many mortgages come with fixed interest rates, which means the rate never changes during the life of the loan. At the same time, your monthly payment never fluctuates, giving you greater predictability throughout your mortgage.

Drawbacks of Owning

More Upfront Costs

There are several upfront costs associated with homeownership, including the down payment, closing costs, home inspection, and other third-party fees. You also have homeowner’s insurance, private mortgage insurance (if you put less than 20% down), property taxes, and any necessary maintenance and repairs.


Speaking of maintenance and repairs, you get to choose how you to take care of your home. If something breaks, you need to pay for the parts and the labor to fix it. Your homeowner’s insurance may help defray some of the costs of certain issues (such as a tree falling on your roof), but, ultimately, it’s up to you to call someone to come out and get the work done.

Decreases in Property Value

While history shows us home values tend to rise, they can also fall. (Meaning if you decide to sell, there is always a chance you could get less than what you paid for it originally.) The price may also fall if you don’t maintain the property or make any improvements.

Challenges with Moving

If you decide you want to move for any reason, doing so is harder. Not only do you have to look for a new place to live, but you also have to deal with the hassle and expense of selling your current one.

Homeownership allows you to build equity and comes with some great tax incentives, but it comes with some pretty hefty upfront costs and significant responsibility.
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Renting: Pros and Cons

If you’re not ready to own a home yet, that’s OK. Just keep in mind some of the benefits and drawbacks of renting a place to live.

Benefits of Renting

No Maintenance Costs

If the air conditioner starts blowing warm air, your faucet leaks, or your dishwasher quits, you don’t have to worry about the repairs. All you need to do is call your landlord and let them know. You aren’t responsible for any of the costs, but you’re also relying on your landlord to get it done in a timely manner. Finding a great landlord is important!

Fewer Upfront Costs

Typically, when you rent, you only need to provide your first and last month’s rent when you sign the lease agreement. There are no down payments, closing costs, or other fees. If you honor your lease agreement, you may even get a portion (or all) of your security deposit back.

Drawbacks of Renting

Rent Increases

Some landlords may increase rent every so often. You may be fine with the payment when you sign the agreement, but it may go up when you’re ready to renew your lease. If so, you might need to look for a new place to live, even if you like your current home. Your landlord may also decide to stop renting or sell the property, which means you’ll have to move.

Inability to Make Changes

Outside of a few small decorative touches, you can’t make changes to a rented home. You can’t upgrade the kitchen, add a porch, or fence in the yard. Depending upon the landlord, you may not even be allowed to paint the walls. If you don’t like the way something looks, you’ll either need to live with it or find a new place to live.

No Tax Incentives

Renters don’t get to take advantage of the same tax incentives that homeowners do. You can’t deduct your rental payments or any of the other costs associated with your home.

No Equity

As a renter, you don’t build equity in your home. The property owner, however, does. Regardless of whether you live in a rented apartment or house, you only get to take your physical belongings with you. The equity stays with the property and the person who owns it.

Renting offers low upfront costs, fewer responsibilities, and greater freedom, but you can’t really personalize your home or build equity.

Renting vs. Owning—The Major Differences

As you can see, there are various pros and cons to both owning a home and renting one. The decision, while difficult, is ultimately yours. Let’s take a closer look at some of the major differences between the two to help you compare your options more closely.

Costs of Renting Vs. Owning

When you sign a lease, the only thing that you need to pay upfront is the security deposit. When you buy a house, on the other hand, you need to provide a decent amount of money for a down payment (the exact amount varies by your mortgage type). You also need to pay closing costs, a home inspection, appraisal and various other fees. While a down payment is a big cost, it’s not disappearing into thin air. The money you pay is going toward building your equity.

While renting, you only need to pay for your utilities and your lease. You can also take out a renter’s insurance policy, but it’s not required. Owning a home comes with more financial responsibilities, but it builds more long-term value. In addition to utilities and mortgage payments, you’ll pay for homeowner’s insurance in accordance with your mortgage. You also have property taxes and any repairs or maintenance your home may need.

While renting may seem like the cheaper option initially, it isn’t always the case. Despite the extra costs associated with owning, shifting markets may mean it’s cheaper to buy. Additionally, once you pay off your mortgage completely, you will only need to pay property taxes and homeowner’s insurance each month. With renting, it doesn’t matter how long you stay in the same place—you always have to pay rent.

Paying Rent vs. Paying a Mortgage

For the duration of your lease, your monthly payment may be the same. In some cases, however, your landlord may decide to raise the rent suddenly. When it comes time to renew your lease, you have to either pay the higher rate or move.

While there are adjustable-rate mortgages, fixed-rate ones are more common. With a fixed-rate mortgage, your payment never fluctuates, no matter what happens to the market or interest rates.

Building Value

When you rent, you don’t accumulate any value. The property you’re living in might increase in value or build equity, but it all goes to the owner. You don’t receive any share of it, no matter how long you live there.

When you buy, on the other hand, the equity the property builds is yours. It gradually accumulates as you repay your mortgage. Home improvements, which can boost the value of the property, can also help to increase your equity. You can access it when you move. You may also be able to borrow against it, which provides you with a financial boost if needed.

Keep in mind that home values may fluctuate over time. While they may increase, they can also decrease. As a renter, you don’t have to worry about this.

Responsibilities of Renting vs. Owning

As a tenant in a rented home, you’re responsible for your monthly rent and utilities—the landlord takes care of the rest. Any home maintenance and repairs are their responsibility to fix (you only need to report them or submit a maintenance request).

As a homeowner, you’re responsible for everything, though you don’t have to do it all yourself. You have your mortgage, utilities, homeowner’s insurance, and all maintenance and repairs. While you might not have any repairs to make one year, you may have to replace the water heater, air conditioner, and refrigerator the next.

The Ability to Customize

You have very little freedom to customize, modernize, or change anything about a rented home. No matter how much you’d like a state-of-the-art kitchen with the latest gadgets, the amenities are up to the property owner.

As a homeowner, however, you can make as many changes as you want. Don’t like the carpet? Tear it out and replace it with hardwood. Longing for granite countertops and a new gas stove? Go right ahead. Any upgrades you want (and can afford), you can do.


Understanding the differences between renting and owning can help you decide what the best choice is for you.

Things to Consider to Help You Decide

If you’re still having a hard time deciding between renting and owning a home, there are a few questions you can ask yourself that might help make the best option for you clearer.

What Can I Reasonably Afford?

When trying to come to a decision, you may need to sit down with a calculator and start crunching some numbers. Take all of your current financial responsibilities into account. Consider the following:

  • How much you have to put down
  • What you need to keep a comfortable emergency fund
  • Your credit score
  • Your debt-to-income ratio
  • Any credit card debt, personal loans, student loans, and other debts you might have  

How Long Will You Be Living There?

It’s a myth that buying a home means you’re stuck in one place forever. If you prefer the nomadic life, enjoy traveling, or want to experience different places without getting tied down, you can always sell your home, or end your lease if you’re renting. Of course, one is easier than the other, so if you already have set plans to move in a year, renting may be a better idea.

And if you’re not sure where you want to settle down just yet, you might want to try out a few different places first before you make your decision.

What Do I Really Want?

When it comes down to it, the decision of whether to rent or own is ultimately yours. What do you really want? If you really want to own a home, then buying a house might make the most sense. If you can’t afford it just yet, you may want to rent for the time being and save up some money. Consider your emotions carefully, but also plan accordingly to avoid making any rash decisions.

Consider your budget and figure out what it is that you want to help you decide if you should rent or own a home.

There’s no clear answer as to whether renting or owning is better. What it really comes down to is what’s better for you. By weighing your options carefully, you can make the best choice for your life.

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