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When Does it Makes Sense to Buy a Home over Paying Rent?


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    Been thinking about purchasing a home in the near future for a while now. I'm not quite ready as I don't really have the traditional 20% down payment savings set aside just yet. And even when I get there, I'm not sure exactly when it makes the most sense to pull the trigger vs just continuing to pay rent and just my save money and/or invest it instead.

    My situation is also a bit unique as I pay far less in rent (I live modestly atm) than I would on any mortgage. Probably as much as 50% less. So I can have a lot more freed up monthly capital if I continue to rent over buying a home. And I am tempted to just invest that money into things that could yield higher returns than real estate, and enjoy the freedom of living on a year to year lease, without being tied down as much.

    When do you think it makes the most sense to buy a home for the first time vs just paying rent? Is it when you save up 20% down? I know many people nowadays don't even wait for that moment as certain home loans let you only put 5% down. Or is it when you have 20% plus a large emergency savings account AND money for home repairs for a few years, to avoid any crazy surprises?

    I know the saying goes 'paying rent and not owning a home is like throwing away money'. Well, I don't think that's true, especially if you can save a lot of money every month renting vs a mortgage, and then invest that money into something that yields just as good if not better returns over real estate. Sure you aren't building equity when you rent, but you have a bit more freedom and also don't have to concern yourself with HOA fees, property taxes and home repairs.

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    I honestly think there are pros and cons of both renting and owning. For many people, buying a home wound up being a 1,000 ton weight around their necks that prevented them from ever being able to move to seek a better life somewhere else. For others it was the perfect investment at the perfect time. My wife and I are lucky to be in the latter camp, but are well aware that so many others are in the former.

    If you do the math, renting is roughly the same as owning a home most of the time. Sure, you aren't gaining any equity in a home, but you also aren't paying property taxes and don't have to ever worry about unforeseen (but inevitable) expenses like paying for a new roof or fixing a leak in the basement. If you are able to budget wisely, you can rent until the day you die and be just as well off, if not better, as many homeowners.

    However, if you find a neighborhood you love and are able to put a sizable down payment towards then owning certainly has its perks, as well. But I agree that home ownership isn't for everyone. It really comes down to is it the right decision for you. If it isn't then renting is just fine.

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    True, they are very similar in a lot of ways, but I feel that rent money goes nowhere but to the landlord, whereas paying a mortgage on a house goes to the ownership of something that is yours. The only situation that makes this a pro really is if you found your "forever home" like some people put it. In that case, paying for repairs etc is just initial upkeep on your investment - an investment that you could potentially make profit on perhaps.