Buying vs. Renting a Home

Is Home Ownership Right for You?

Before making a hasty move, review the details and make the financial decision that is right for you. While owning a home may be beneficial for some, many people find renting to be a better option. There are examples that show renting can save consumers money. However, the decision to rent versus buying a home is a personal decision.

Advantages and considerations for buying versus renting
	Advantages	Considerations
Buy	Property builds equity Sense of community, stability, and security Free to change decor and landscaping Not dependent on landlord to maintain property	Responsible for maintenance Responsible for property taxes Possibility of foreclosure and loss of equity Less mobility than renting
Rent	Little or no responsibility for maintenance Easier to move	No tax benefits No equity is built up No control over rent increases Possibility of eviction

Chart Courtesy of Government National Mortgage Association (Ginnie Mae)

If you decide to buy a home, your income, savings, and monthly expenses play an important role in determining how large a mortgage you can afford. To help determine the amount you can afford, you can use this mortgage calculator (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) from Freddie Mac, or contact a HUD-approved housing counseling agency in your area (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) . HUD approved counselors can help you create a home buying budget at no charge.

Costs of Homeownership

Under current U.S. tax rules, taxpayers who itemize their expenses can deduct the interest paid on mortgage debt up to a certain limit. New legislation reduced the amount through the year 2026; however, the change affects only those living in expensive housing markets. With a tax benefit for homeowners, the savings could be significant. It is important to know all of the costs impacting your decision to buy.

If you purchase a home in a sub-division or planned community, you may be obligated to pay a Home Owners Association (HOA) or Property Owners Association (POA) fee. The same may be true if you buy a condo or townhouse. This fee may cover things like trash and snow removal, mowing and maintenance of common grounds and upkeep of shared facilities like a clubhouse, playground, tennis courts and swimming pool. HOA fees vary greatly depending on the community, so they need to be considered in your decision. If you live in a state with high property taxes, you will also need to factor in this additional cost each year.

Buy vs. Rent Comparison

The chart below shows a cost comparison for a renter and a homeowner over a seven-year period. The renter starts out paying $800 per month with annual increases of 5%. The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000. After 6 years, the homeowner's payment is lower than the renter's monthly payment. With the tax savings of homeownership, the homeowner's payment is less than the rental payment after 3 years.

Buy vs. Rent Comparison
Years	Rent Payment	Mortgage Payment	Monthly Difference	After Tax Savings	Yearly Difference	After Tax Savings
1	800	1000	-200	-50	-2400	-600
2	840	1000	-160	-10	-1920	-120
3	882	1000	-118	+32	-1416	+384
4	926	1000	-74	+76	-888	+912
5	972	1000	-28	+122	-336	+1464
6	1021	1000	+21	+171	+252	+2052
7	1072	1000	+72	+222	+864	+2664

From 8 to 30 years, savings increase every year.

Monthly Expenses: Buying

Your rental company takes part of your rent payment to cover certain housing expenses. When you decide to purchase a home, you accept responsibility for paying for those expenses. They are additional costs to your monthly mortgage payment and should be included in your budget estimates. Typical expenses include: property taxes and special assessments; home/hazard insurance; utilities; maintenance; HOA or condo fee(s); membership fees (such as for recreational facilities), and other services.

HOME BUYING RESOURCES

Home Buying Checklist (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) - Take this list with you when comparing homes.
Home Ownership: Finding the Right Home, Buying a Home and Owning a Home (NCUA)
Fair Housing: Equal Opportunity for All (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) (HUD booklet)
Avoid Predatory Mortgage Lending (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) (Center for Responsible Lending)

To learn more about buying a home, visit:
Buying a Home (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) (U.S. Department of Housing and Urban Development)
Know Your Options (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) (Federal National Mortgage Association, or Fannie Mae)

Buying vs. Renting a Home