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Rent vs Own: Know the Differences to Help You Decide

Renting vs. Owning a Home

If you’re currently renting, your lease is prepared to expire in a matter of time. When that time comes to renew your lease or jump ship to another place, will you continue to rent or consider owning a home?

The idea of homeownership can seem intimidating, especially for a potential first-time homebuyer. The home buying process itself requires diligent planning and undertaking, involving multiple parties that set you up for home loan success. These distinctive characteristics only scratch the surface, making the battle between rent vs. own a hot topic in the real estate industry.

There is no clear winner when faced with the decision to rent or own as it varies by circumstance. Meaning, it all comes down to you and your goals. Some might say that owning a home is infinitely the more logical choice. Before we give our thoughts on that statement, we will expand on the differences between renting and owning, so you can be better prepared to make a knowledgeable decision.

How to Know If You’re Renting vs. Owning

Everyone should be aware of the situational difference between renting and owning. In some aspects, renting and owning have slight similarities that will be familiar when transitioning between the two. For example, when it comes to payment, whether you rent or own, you pay a set dollar amount each month. However, we’re not here for the similarities. This article focuses on the benefits and drawbacks of renting and owning.

So now for the situational difference. What makes you a renter or owner?

When you rent, you pay another entity money to live at their property, temporarily. Renting requires you to sign an agreement in the form of a lease, stating that you are borrowing a space that belongs to someone else, along with other terms. Who creates the lease? Essentially, a property management company or the landlord themselves create the lease, since they own the property you are attempting to borrow.

In contrast, owning a home means exactly what it suggests. As a homeowner, you own the home and are welcome to do infinitely more things with it than if you were to rent it. There are two approaches to purchasing a home, with cash or get a mortgage. The latter option is the most sought after, especially when paying with cash is an impractical situation for most home buyers. There is documentation involved with getting a mortgage that’s similar to a lease agreement for renting, but more complex and in-depth. However, once you close escrow, that home is officially yours to keep, with no expiration date in sight.

Now that we know the situational difference between the two, it’s time to touch on what really matters. To get a clear understanding of which selection aligns with your goals, we’ve provided both benefits and disadvantages to renting and owning.

Pros of Renting

Short commitment

You may have heard some of your friends and family subtly mention that they would like to try living somewhere else. Maybe you had the same thought too! A new city buzzing with new experiences? That sounds like the perfect idea for my bucket list. Whether somewhere else means another city, state, or even another country, renting is the ideal choice. Think of living situations where you’re confident you won’t be sticking around, such as moving for college or a temporary job. Moving to fulfill a short-term commitment is why renting is so popular among young adults.

Utilities paid by the landlord

Not every rental property guarantees this pro, as it is a decision made by the landlord or property manager. However, for most rental properties, “it’s common for landlords to include water and trash [in the rent paid by the tenant] because these can be difficult to transfer from individual to individual” (Avail, 2021). Meanwhile, the tenant is responsible for utilities seen as convenient or extra, such as internet and cable. Remember to carefully read your lease agreement to confirm which utilities are your responsibility. In the case where these terms are unclear, contact your landlord to be on the same page.

Flexible eligibility

The short commitment aspect of renting makes the application process relaxed for landlords when deciding on a tenant. Depending on the rental property in question, some landlords have stricter guidelines for choosing a tenant while others are more lenient. The four screening factors that matter the most to landlords are credit score, credit report, income, and criminal history. Overall, landlords will base your eligibility on fewer factors than if you were to try owning a home.

Maintenance and repairs by the landlord

Similar to utilities, landlords will usually pay for most maintenance and repairs. Since maintenance is a rather general term, it includes various events ranging from a clogged sink to a loose door handle. Again, read your lease agreement carefully to observe what the landlord dictates as maintenance. If these terms are unclear in the lease agreement, contact your landlord right away to avoid any surprise charges in the future.

Renting Cons

Paying your landlord

As we mentioned, renting translates into borrowing someone else’s place to live temporarily. The amount you pay each month to rent is out of your control because the landlord or property manager determines that what you pay is what their place is worth. In other words, the rent paid is going straight into the landlord’s pocket, and in turn, paying off their mortgage. When you own a house, the money you pay on your mortgage builds your equity over time and provides a much higher return than renting, which we will touch on later.

No remodeling

When we mean remodeling, we don’t mean placing nails on the walls to hang frames and other interior accessories (even though some landlords have strict rules against this). Remodeling means “changing the structure or form of something in your home.” Examples include changing the wood floors, painting the walls a different color, or replacing the kitchen cabinets. Because renters are temporary tenants in the eyes of the landlords, landlords have the final say as to what can be renovated/adjusted or not.

Rent hikes

The rent you pay towards your landlord is not always going to stay the same. That’s not to say that every landlord frequently increases the rent, but it does imply the scary possibility that your rent can go up at any time. “In most areas without rent control, there is no limit on the amount your landlord can increase the rent” (Nolo, 2021). Unfortunately, tenants as usual will have no say in the matter. Some compliantly adjust to the rent hikes, while others let their lease expire and look elsewhere.

Pros of Owning a Home

Consistent payments

As a renter, your rent can increase at any time. On the other hand, homeowners can choose a monthly mortgage payment that never goes up. You worry less as a homeowner because you own the place you live in! Because you did borrow money from a mortgage lender of your choosing, each monthly payment gets you one step closer to having your mortgage paid off. This return on investment can bring you closer to financial freedom, explained next.

Return on investment

Owning a home means you pay yourself, not a landlord. Every month you pay towards your mortgage reduces the balance of your borrowed money from a mortgage lender. In other words, you’re paying yourself back the money that you borrowed instead of towards your landlord’s mortgage. You can rest peacefully at night knowing that your cash is gradually building your net worth. Purchasing a home can be one of the smartest investments you can make in life.

Build wealth

Owning a home means you pay yourself, not a landlord. Every month you pay towards your mortgage reduces the balance of your borrowed money from a mortgage lender. In other words, you’re paying yourself back the money that you borrowed instead of towards your landlord’s mortgage. Purchasing a home is one of the smartest investments you can make in life.

Infinite remodeling

Have you ever thought about changing the way your place looks? Maybe you have the extra money in your budget to take a weekend trip to Ikea or your favorite furniture store. Need a new vanity in your bathroom or new ceiling lights to brighten up your bedroom? No problem when you own a home! With renting, certain renovations cannot be altered in any shape or form. However, when you own a home… you own the home! You can perform infinite altercations that make you the interior designer you’ve always wanted to be.

Turn into a rental property

Depending on your loan program, you may be able to rent out your home. Consult your loan officer if you plan to use the home you are purchasing as an investment property to rent out to tenants.” Homeowners “may want the benefit of extra income to save money or pay down debt, or they may see it as an option to selling during a housing slump” (Investopedia, 2021).

Cons of Owning a Home

Long commitment

Buying a home can be as big of a commitment as marriage. When you decide to commit, you should think of your goals with a futuristic mindset and be confident that this is something that you want to do. Always keep in mind that the option to buy a home will be there no matter how much time passes by. The only downside to waiting is the possibility of home values and mortgage rates increasing over time, prompting you to spend more than you would have at an earlier point. Next time you’re home shopping on Zillow or Redfin, try to imagine yourself in that home, that area, and that neighborhood in the next 5+ years.

Upfront costs

When you rent, the costs to pay upfront are usually straightforward. Most tenants are expected to pay a deposit plus the first month’s rent to secure their spot in the rental property. In contrast, when you own a home, there are so many costs involved in the mortgage process that will at first, make your head spin. It made mine. Altogether, these costs make up your closing costs, which are required at the final stage of the process to officially claim your home. Unfortunately, a lot of these costs are unavoidable. We recommend going over these costs with your mortgage lender to not only educate yourself on why they’re necessary but to also look for any unclear costs.

Maintenance paid by you

The bright side of owning a home is obvious, you own the home! As you know, with every up, there’s a down. One of the downsides of homeownership is that all maintenance will need to be taken care of by the owner, you. When you rent, some landlords will provide extended assistance with maintenance as outlined in your lease agreement, but when you own a home, you are your landlord. Meaning any broken faucet, chipped walls, or moldy floors will have to be an out-of-pocket cost, allocating to costly expenses over time.

What Will You Choose: Rent vs. Own?

Now that you know the substantial differences between renting and owning, has your perspective changed? All factors considered, our clear answer as to what you should do would be to own a home. The benefits outweigh the cons and are far more beneficial to you in the long run than if you were to rent. You now know firsthand how much your equity can grow by purchasing a home! With patience and time, buying a home can be one of the best investments you can make in life.

At the end of the day, your goals will decide which route you should take. This article is not meant to pressure you into making this decision. Instead, we hope it serves as an educational tool on the matter and that you now have a working knowledge of why all those people tell you in your ear to “buy a home”. Now, you can think with a clearer head for the next time your lease is up. When the time comes, check out our mortgage calculator to visually view a scenario in which you’d purchase a home. Do some online home shopping just for fun while you’re at it. Dipping your feet into the water is the best way to start rather than just diving in head-on.

If you have any questions regarding the process or would like to see your options for when you change your mind, check out our loan programs to see if any can be applied to you!

Download our Rent vs Own PDF here!


Financing details are for educational purposes only. Rates, program terms, fees, and conditions referenced are subject to change without notice. Not all products are available in all states for all amounts. All mortgage applications are subject to underwriting guidelines and approval. This is not an offer of credit or a commitment to lend. Residential Wholesale Mortgage, Inc. dba RWM Home Loans is an equal housing lender licensed by the CA Department of Real Estate #01174642 and CA Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. NMLS# 79445

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