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Buying vs. renting a home: Pros, cons and how to decide

Pacaso’s Editorial Team

, Author

Published Date:

May 7, 2025

Two people moving into a new home, buying or renting it.

It’s no secret that home prices are substantial. The average sales price for new houses sold in February 2025 was $487 thousand. So, is it better to buy or rent a home? That depends on your lifestyle, as buying is typically more stable, but renting is better for those seeking flexibility.

Other factors, like initial costs, interest rates, insurance costs, property taxes, maintenance responsibilities and the ever-changing economic landscape, can also shape how people choose to live and if they decide to invest in real estate. Let’s go over the pros and cons to help you decide whether it's better to rent or buy a home.

Pros and cons of owning a home

Owning a home provides more stability and long-term equity but comes with varying costs, especially with a variable-rate mortgage. Here’s a list of pros and cons when purchasing a home:

Pros	Cons
Can generate long-term equity.	Owners must pay additional expenses (insurance, taxes, etc.).
Has controlled monthly payments with a fixed-rate mortgage.	Variable-rate mortgages will have fluctuating monthly payments.
Can develop stable connections in a long-term community.	Sometimes beholden to Home Owners Association (HOA) fees and requirements.

Pros

A statistic sharing that 22% of homebuyers purchase because they desire to own a home of their own.

Owning a home can build equity over time, but it’s more than that for most. Twenty-two percent of homebuyers purchase because they want to own a home. There’s a sense of stability and accomplishment that comes with homeownership, and this is why many pursue that dream.Part of this ownership comes back to making the home your own. Home improvements are a boon to homeowners who want to increase the value of a home or truly make it theirs. However, depending on the type of property ownership, there may be some restrictions.Equity is still a vital tool for homeowners. Homeowners can use equity to turn a profit on the home later, or they may also borrow against it to pay for expenses like medical bills, college tuition and home improvements. There’s also the stability. Unless you pay cash, fixed-rate mortgages enable flat monthly payment amounts over the life of the loan, except for insurance premiums and tax fluctuations over time. Even so, these can be relatively minor fluctuations you can plan for.

Cons

Homeownership is generally more expensive than renting because there are more costs to consider, such as property taxes, higher insurance costs, utility costs and maintenance. Many of these can also fluctuate depending on varying factors, such as insurance rates in your area.Buying, setting up a mortgage and scheduling necessary inspections could also be time-consuming. If you need the home now, waiting for these processes to complete can be frustrating, sometimes being pushed by several months, depending on scheduling limitations. Homeowners might also see their creative vision limited by a Homeowners Association (HOA). While HOAs can sometimes benefit you through snow removal, lawn maintenance, and other services, others can restrict housing colors or your plans to expand your home.

Pros and cons of renting a home

Renting a home saves time from the purchasing process and provides more flexibility while trading in the benefits of ownership, such as tax breaks or stable payments. Here’s a list of pros and cons when renting your home:

Pros	Cons
Smaller fixed payments for the entirety of the lease term.	Cannot control when rent increases occur.
You do not need to pay emergency maintenance costs.	The owner could sell the home, forcing you to move at the end of the lease term.
Can come with community amenities.	No equity or tax benefits like homeownership.

Pros

A statistic showing that renting is cheaper than buying in the 100 largest metro areas.

Renting works well for those who value flexibility, convenience, and savings. Median rent was around $1,406, around $500 cheaper than the average monthly mortgage of homeownership. Short-term rentals, in particular, may be more appealing to a nomadic lifestyle, depending on whether you want to stay in a city for a few months instead of a year. Some of these may even come pre-furnished.Renters are also not responsible for maintaining as much of their unit, enabling renters to save what they would spend on maintenance costs for a down payment to buy a house in the future. Minor maintenance concerns, such as fixing a garbage disposal, are among the few exceptions.

Cons

A renter’s main inconvenience is the lack of control. There’s no home customization, you might be subject to property manager inspections, and your monthly rent can go up with each lease renewal. Thankfully, there are laws in place that regulate how often a landlord can raise rent prices. Renters may also have their home sold while they live there, meaning they’ll have to move out at the end of a lease term. Some lease contracts even have clauses forcing the renters to move out within 30 days if the property is sold. It’s vital to read your contracts fully, regardless of renting or buying.While home ownership is often seen as a goal to strive for, renting vs. buying a home may make more financial sense in certain stages of life. Let’s look at the differences between buying and renting.

Buying vs. renting: 5 differences to know:

Your costs and lifestyle needs will affect whether renting or buying a home is better. Here’s a table breaking down some major differences.

Renters	Homeowners
Pay rent	Pay mortgage (if you have a loan)
Pay utilities (depending on the lease)	Pay utilities

1. Monthly housing payment

Buying a home involves paying a mortgage, which includes the principal, interest, utilities, maintenance, and insurance. Renters have to pay a fixed monthly rent, utilities some of the time, and optional renters insurance.Homeowners are responsible for a wide range of costs taken by a mortgage company, often through an escrow account. Your mortgage company uses the escrow account to pay property taxes and homeowners insurance. You might also need to pay mortgage insurance premiums if you purchase your home with a down payment of less than 20 percent. Utilities are billed separately. If you rent a home, you will pay a set amount for your lease, which can change during renewals. You also may be responsible for the utility bills, which could be part of your rent or separate, depending on your rental agreement. Many people also choose to get renters insurance; some leases even require it. Whether you’ll pay more in your monthly housing payment as a renter or a homeowner depends on many factors, including market conditions, interest rates, and the size of your down payment. Knowing these factors before buying a home will help you understand if you can afford it. Consider second home co-ownership with Pacaso if you want a second home and don’t plan on using it year-round.

Renters	Homeowners
A single monthly payment for rent.	A single mortgage payment that covers principal, interest, property taxes, insurance, escrow, and more.
Rent can go up at the end of your lease period.	Payment amount stays flat for homeowners with fixed-rate mortgages.

2. Insurance

Homeowners often pay more than renters for insurance. The average cost for renters insurance is around $138 yearly for $100 thousand in liability coverage and $30 thousand in personal property coverage. Meanwhile, a homeowner’s policy averages $2,110 yearly for $300 thousand in dwelling coverage and good credit.Renters insurance can provide liability protection for at-fault incidents for things you don’t own, often including damages to the residence. It can also protect your belongings in case of flood, fire or theft. Some homeowners require adequate liability coverage to protect their homes in the event of a major incident. Meanwhile, homeowners are generally required to obtain insurance to qualify for financing. Like renters insurance, homeowners insurance covers liability, such as people slipping in your home, and coverage for your belongings. Where it differs is that the coverage for the house itself must be broken down by type, such as coverage for other structures, coverage for wind and hail and coverage for the dwelling itself. This complexity makes homeowners coverage much more expensive.

Renters	Homeowners
Landlords may require renters insurance.	Loan officers may require homeowners insurance.
Rental insurance covers damage to the rental unit and the tenant’s belongings.	Home insurance protects the home itself as well as the owner’s belongings.

3. Home equity

Rent payments contribute solely to the landlord's income and do not provide renters with any property ownership stake or investment value, so tenants do not build equity. Instead, that equity goes to the rental property owner.In contrast, homeowners make mortgage payments, build equity in their property, and may benefit from property value appreciation. This makes buying a primary home a long-term investment with potential financial gains. Additionally, home equity can allow homeowners to access funds through home equity loans and lines of credit.

Renters	Homeowners
Do not benefit from increased equity or property value appreciation.	Benefit from the value appreciation of their asset.
	Potential to access equity loans and lines of credit.

4. Property taxes

Homeowners are required to pay annual property taxes, while renters do not. Property taxes vary by state and county, with higher rates in Connecticut, New Jersey and Illinois and lower rates in Alabama, Colorado and Nevada. Although homeowners must pay annual property taxes and mortgage interest, tax deductions can lead to significant tax savings. Even when selling a home, homeowners may qualify for capital gains tax exclusions that further reduce their tax burden. Homeowners can also take advantage of different tax breaks for owning a second home. Tenants who rent typically do not receive direct tax benefits related to their rental payments, and property taxes may be fixed into their lease agreements. You may qualify for deductions if you use the space for something tax-deductible, such as working from home.

Renters	Homeowners
Rent may include a fixed property tax.	Pay annual property taxes.
Do not benefit from tax deductions.	Potentially benefit from tax deductions.

5. Lifestyle

Renting offers greater flexibility and mobility, making it an appealing choice for individuals who prioritize a transient lifestyle. Renters can easily relocate for job opportunities or personal preferences without the burden of selling a property. Renting also eliminates the responsibility of property maintenance and repairs, providing a more carefree living experience. On the other hand, buying a home suits those seeking stability and ownership. Ownership allows people to customize their living space and establish long-term relationships within their community. Although homeowners have more control over their living environment, they are responsible for all property maintenance and upkeep.

Renters	Homeowners
Little to no maintenance responsibilities.	Responsible for all property maintenance.
Potential access to shared amenities.	Potential to build long-term community connections.

A flowchart guiding you through questions to ask when considering whether to buy or rent a home.

The cost of buying vs. renting a home [$300,000 home example]

Renting generally involves lower upfront costs, as renters typically only pay a security deposit and first month's rent, while homebuyers are responsible for repairs. However, renting can be more expensive than buying in the long term, as homeowners build equity, benefit from potential property and receive more tax benefits.Here is a breakdown of the cost expectations of renting vs. buying a $300,000 home. Items like taxes may vary depending on your state or county.

	Buyer	Renter
Down payment/deposit	$60,000(20% of selling price)	$2,400 (security deposit)
Closing costs	$12,000(4% of selling price)	$0
Total upfront costs	$72,000	$2,400
Monthly payment	$1,414 ($240,000 at 7.07%)	$2,400 (0.8% of home value)
Property taxes	$338/mo(1.35% of value)	$0
Insurance	$115/mo(0.46% of value)	$32 (1.32% of annual rent)
Maintenance	$250/mo(1% of selling price + 2% inflation/yr)	$0
Total monthly costs	$2,303	$2,432
Total first-year costs	$99,636	$31,584

Simply put, renting is better if you prefer convenience, while buying is better if you prefer stability. So, if uncertainty and commitment are the only things holding you back, wouldn’t it be great if you could try it out before committing to a 30-year mortgage? Thankfully, you can do that with PacasoNow, which lets you enjoy a luxury vacation home for 12 months. At the end of this term, you can choose to either walk away or keep the home with a shared ownership model, with no penalty for the price paid.

Buying vs renting a home FAQ

01: Is it better to rent or buy a home?

Your budget and lifestyle considerations determine whether you should buy or rent a home. Although buying a home can be an investment, renting a home provides a flexible lifestyle that can help you save for other investments.

02: Is renting cheaper than owning a home?

It often depends on where you’d like to live. For example, a mortgage payment on a home could be cheaper in a less desirable neighborhood compared to the rental price of an apartment in a highly desirable location.

03: Is home ownership a good investment?

Home ownership can benefit buyers if the property builds value and equity over time. However, other factors like your budget and the amount of time you want to live in one place can help you determine if home ownership is a good investment for you.

04: Is renting to own a good idea?

Renting to own can be a great opportunity for home buyers on a budget to eventually own a property. However, the terms and conditions of these agreements may limit your options for traditional mortgage financing, as lenders might be hesitant to finance a property where the owner already has an existing agreement.