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Common wisdom holds that in the long-term, it's always better
to buy a home than to rent. However, given the changes in
how people work and live in the last 20 years, it's not obvious
that buying is necessarily better than renting.
When is it better to rent than to buy? Financially speaking,
the rule of thumb is that if you don't stay in a home for
at least 3 years, you probably won't break even on the closing
expenses incurred while buying it. That is, of course, as
long as you're not speculating that property values will rise
dramatically. Given the high costs of owning a home, it's
possible that you will not see the financial benefits of buying
for 5 to 10 years.
Besides some potential financial advantages, renting a home
offers other benefits. For example, renting relieves you of
the risk and headache of maintaining and repairing the structure--if
a pipe bursts, it's not your responsibility. Some people also
value the flexibility it offers--i.e., the freedom to pull
up stakes, not having to go through the process of selling
a home. And with lower monthly payments, renting may allow
you to save more for a down payment when you do decide to
buy.
You can use our Buy
vs. Rent Tool to compare the financial costs and benefits
over time of buying vs. renting a home.
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