Sorting through this major life question is no easy task. Here are some questions and tips from experts to help your family reach a decision.
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In today's overheated real estate market, there are few bargains to be had when it comes to renting or buying a home. Between limited inventory and the pressures of inflation, the cost of housing has increased more recently than it has in three decades.

It's a reality that can make it especially challenging to discern whether it makes more sense for your family to rent a home over the long-term or take the plunge and buy one. The answer to this question will likely be different for every family based on your unique financial picture and life stage. But there are certain universal truths that can help you sort through this fork in the road with a bit more clarity.

Here are some of the critical questions to consider when trying to decide whether it is better for your family to rent or buy a home.

Are your family finances ready for home ownership?

First things first. Owning a home is a gigantic financial responsibility, one that comes with myriad expenses that renting does not. So, start by taking a good, long look at your finances to get clear on whether your bank account is up to the challenge of home ownership.

"Families should consider buying a house over renting when their financial situation allows them to do so," Scott Rubzin, founder of Tiffany Property Investments, tells Parents. "Buying a home requires being financially stable with a steady income. If you don't have a stable income, or have a lot of debt to pay, investing in a home is not the right option. You should only buy a house when you're confident you can handle the financial implications of it."

But what exactly are the financial implications to keep in mind? Beyond the monthly mortgage payments, home ownership comes with a long list of sometimes daunting and unexpected expenses—and these are generally expenses you do not have as a renter. Think: maintenance, emergency repairs, renovations, HOA dues, and property taxes (which are incredibly steep in some parts of the country.) All of these expenses can put a serious dent in your free cash each month and year, bringing about a significant change to your lifestyle compared to life as a renter.

An image of a couple moving.
Credit: Getty Images.

Do you have a consistent track record of being a good saver?

While we're on the topic of your family's finances, yet another consideration to bear in mind when sorting through whether it makes more sense to rent or buy is your track record of consistently setting aside money in a savings account.

Why are your savings habits important you ask? Because again, homeownership involves a lot of expenses. And if you are not someone who's good at maintaining an emergency fund, then you may easily get in over your head. 

"Being able to consistently save money bodes well for successful homeownership. As an owner, the home is always in need of something—a repair, regular maintenance, or an upgrade," Greg McBride, a CFA with Bankrate tells Parents. "If you haven't figured out how to save before buying a home, you're unlikely to figure it out after becoming a homeowner."

McBride's point is an important one. If you're not a good saver, or worse yet, if you're already under a great deal of financial stress and simply do not have the spare cash to save money regularly, then homeownership will only add to your burdens.

Do you plan on staying put for a while?

Another reality of home ownership is the fact that buying a property only really pays off (in terms of wealth building at least) if you plan to continue living there for at least three to five years.

"The benefits of homeownership take time to accrue because of the significant transaction costs involved with buying and selling a home," says McBride. "Don't think of this as a get-rich-quick-scheme. If you plan to be in the home for five years or more, the odds are in your favor of building equity, and having homeownership act as a wealth builder."

If your future is at all uncertain and may require moving for some reason, then buying a home may not be the wisest financial move. (The exception to this rule is when you plan to keep the home as a source of rental income after you move.)

"If you move around a lot for work, it makes sense to rent a home over buying one. Many families change cities every few years because of health or work situations," says Rubzin. "Buying a house, in this case, wouldn't be appropriate for them since all of their money would get tied up in their down payment, and home equity." 

Are you paying more for rent than you would for a mortgage?

Of course, there are experts who are big proponents of getting into homeownership as soon as you possibly can, if your finances can handle the expense. This is because it often makes far more sense to be paying a mortgage on a home you own and thus building equity, then it does paying the mortgage on someone else's home as a renter.

Martin Orefice, CEO of Rent To Own Labs, suggests comparing your monthly rent payments to any projected mortgage costs. If you're paying more in rent than you would on a prospective mortgage, then it may be time to buy a home and save yourself some cash each month. 

"If a family can afford to buy a home, they absolutely should. Every penny you spend on rent is money that you're not investing in an asset that's going to grow in value over time," Orefice tells Parents. "There are financial hurdles to being able to afford a home, but the starting point for considering this move should be that it's a good idea.

"If you're paying less in rent than you would on a mortgage, it may make sense to stay where you are, especially if your monthly budget is tight," Orefice adds.

Are you ready to give up the freedom and benefits of renting?

One of the most significant drawbacks of renting is that you're helping someone else (your landlord) build equity and wealth. You're paying off their mortgage and not building wealth for yourself. But in exchange for this reality, you're maintaining quite a bit of freedom and various other perks, which—in some cases and for some families—can be more valuable.

"There are several instances where it makes sense for families to rent. If there is an upcoming financial change that will increase a family's buying power—for example, a graduation from school or a return to the workforce for one parent—then it may be beneficial to hold off on purchasing at this time," Alix Nadi, a realtor with RE/MAX Around Atlanta Realty, in Alpharetta, Georgia, tells Parents.

Additionally, if a discussion with a potential mortgage lender reveals that a credit improvement is needed before you'll qualify for a competitive interest rate, then it may be in your family's best interest to hold off on a home purchase, while you spend some time polishing your credit score.

"Schools and lifestyle should also be considered when determining if a family should buy or rent," continues Nadi. "For example, if a family is from out of state and are unsure about what part of town they want to move to, I often suggest renting for a year to get a better feel for the area."

Ron Laserna, regional real estate manager for Reali, a real estate and fin-tech company, echoes Nadi's sentiments, highlighting the many benefits of renting that may serve some families quite well.

"Being a renter has its perks, primarily the flexibility to change your living situation relatively easily. Breaking a lease will take less time and cost less money than going through the process of selling a home if you need to move," Laserna tells Parents. "In addition to flexibility, you might depend on knowing what your monthly expenses are and not want the responsibilities and unforeseen costs of maintenance and upkeep that come with homeownership."

Bottom line: homeownership may not be right for every family

It should be abundantly clear by this point that there are countless variables to consider when deciding whether to rent or own a home. With all the potential forks in the road, arriving at the appropriate answer to the question of whether to rent or buy will be a uniquely personal decision for your family and your current life circumstances. If you ultimately find that home ownership is not a logical move at the present time, that's perfectly okay. The key takeaway is that buying is not right for everyone.

"Ask yourself the following questions: Do you feel you need to save more money for a down payment?" recommends AJ Barkley, neighborhood and community lending executive at Bank of America. "Could job security impact your ability to pay your mortgage? Is home maintenance something you want to avoid? Do you need to build or rebuild your credit? Are you planning to move in the near future? If you answered yes to any one of those questions, renting may make more sense for your current situation."

"Buying a home is not a one-size-fits-all approach." Barkley adds. "And everyone's homeownership timeline is unique."