Economics on Buying vs. Renting

Making the decision to buy or rent can be challenging, as both options have multiple pros and cons that can sway a person’s decision. The main difference between buying and renting is that buying a home requires a larger amount of money upfront, while renting usually requires a security deposit and, in some cases, the first month’s rent.

Economics on Buying vs. Renting


The costs of buying a home are most likely going to exceed the costs of renting, due to the down payment on a house. Renting is easier on the wallet since you know what to expect; between utilities and monthly rent, you have a good idea of what your monthly expenses will be. Apartments in Houston are going to have more demand and value than rural, small-town apartments.

Down payments on houses are usually between 5% and 20% of the home’s price. This will almost always exceed the cost of renting. For first-time homeowners, the financial responsibilities don’t stop at the down payment. Monthly mortgages will now be a regular payment as well as utilities, home and lawn maintenance, and repairs such as new roofs.

Expect the Unexpected

When you rent an apartment, you are responsible for paying a fixed amount of money every month, as well as any utilities that are not included in rent. If something breaks, a light is out, or the AC needs to be replaced, you will need to call your landlord and they will take care of it as soon as possible.

Another financial responsibility to remember while renting is having enough money to cover your security deposit. This is used for any damage done to the apartment itself such as scratches on floors from pets, holes in the walls, or any other repairs that are not covered at the landlord’s expense. This will be taken out of your security deposit, which equals your first month’s rent.

When you buy a home, you are responsible for calling an outside source to come and fix the issue for a fee or fix it yourself. Let’s put it into perspective: it’s more challenging to fix an AC unit in your home and compare rates with outside businesses than it is to have your landlord take care of the issue. Factoring in these situations is important as you need to make sure you have the funds available in the worst-case scenarios.

Calculate Your Spends

There are certain “rules” to follow when thinking about purchasing a home. For example, your monthly income shouldn’t make up over 30% of your mortgage. Exceeding this could lead you into debt over the long run as the bills and payments keep accumulating.

Renting eliminates this since you already know what you will be paying every month, but keep in mind you should still have wiggle room in costs leftover each month even after your monthly rent payments. Things to include when calculating what you have left over include groceries, gas, car payments, utilities, phone bills, cable and internet, insurance, etc.

By calculating all of your spending, you will know how much money you have left over each month, which will help ease the stresses of buying a home or renting.

FG Editorial Team
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