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It’s much cheaper to buy than to rent.

March 2, 2018

Are you thinking of moving into a new home? Learn whether buying a home or renting a home makes the most sense for your personal finance.

Whether it’s cheaper to buy or rent a home is one of the most hotly debated topics in housing. Many argue that renting essentially throws money away, while borrowing to buy a home involves building equity over time. However, with the need to cover the cost of repairs, maintenance, upkeep, homeowners insurance, and real estate taxes, homeowners have to budget for a lot more than just their monthly rental payment. In much of the country, it turns out that it’s cheaper to buy than to rent. However, there are specific individual issues that can make the answer much different for you than for your neighbor, and you need to consider those to make your best personal choice.

From a purely economic standpoint, you can compare costs of renting and owning and come up with answers about which is cheaper in a certain location. The rental vs ownership statistics done in 2017,found out that ownership costs were substantially cheaper than renting in major cities: like Tokyo, Istanbul, Paris and other major metropolises in the world.

Some will take issue with the methodology that the study used. For the most part, the analysis only compared monthly mortgage costs based on typical homes against the rent for a similar home. The assumption, therefore, is that the equity you gain from making mortgage payments roughly cancels out the added costs of home ownership, most of which are already baked into what renters pay in monthly rent. Your own experience will vary, but many homeowners would say that what they’ve put into their homes for maintenance and upkeep is greater than what they’ve gained from equity, especially in the early years of their mortgage loans. However, similar studies have come to the same general conclusions even when they add in maintenance and purchase-related costs.

Finally, one last thing to keep in mind is that owning a home involves an opportunity cost. The money you sink into a down payment is money that you can’t use elsewhere, whether it’s to invest toward other long-term financial goals, spend on education, or simply improve your standard of living. Home prices tend to go up modestly over time, but in most markets, real estate won’t provide the returns that the stock market and other investments have produced over the long haul.

Deciding whether to buy or rent a home is partly a financial decision, but it also involves plenty of additional factors as well. By considering all of the issues that go into the buy vs. rent decision, you’ll improve the odds that you’ll find the best option for your particular situation.


Mr. Cemal Ozkus.


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