Renting vs. Buying: Financial Considerations
February 17, 2026
Literally millions of articles have been written on this topic. Seriously, if you google the phrase ‘rent vs. buy’ you will turn up roughly 2,000,000 results. So clearly there are a lot of opinions about which decision is best.
But is there really a best answer? Like so many other things in life, it depends on your individual situation, and needs to take into account both emotional as well as financial aspects. Here are several key factors to consider.
- First, can you really afford all of the costs associated with buying a home? Most experts agree that your housing costs should not be more than 25% to 30% of your gross income. In addition to the down payment, usually 5-20% of the purchase price, there are closing costs, possible repairs that may be needed, plus the cost of ongoing maintenance (estimate 1% of the home’s value annually), insurance, and real estate taxes, and private mortgage insurance (PMI) if your down payment is less than 20%. And don’t forget about HOA fees if you choose a condo or planned development.
- While it’s true that you are building equity with your mortgage payments, real estate is not a guaranteed investment. Compared to the stock market, real estate as an investment barely outpaces inflation over time. Housing markets and neighborhoods can run cold just as much as they can run hot, and it’s possible to wind up owing more on the mortgage than the house’s appraisal value when you decide to sell. Consider the opportunity cost of tying up a sizeable chunk of cash in your down payment versus investing the same amount. Don’t forget to add in annual taxes and insurance.
- The longer you plan to remain in an area, and if the cost of renting is high, the more you may want to consider buying. The longer you own a house, the longer you have to spread out the closing and other associated costs of ownership. Generally, if you think you may change jobs or move to a new area within the next five years, renting is the better financial option that will give you more flexibility. Sure, you could buy a house and rent it out if you decide to move—but there are significant costs, not to mention headaches, associated with being a long-distance landlord.
- What are the tax implications for your situation? As of 2025, the mortgage interest deduction is still available for new loans up to $750,000, but you must itemize your deductions to claim it. The standard deduction has increased to $15,000 for single filers and $30,000 for married couples filing jointly, making it less likely that most homeowners will benefit from itemizing unless they have significant mortgage interest, property taxes, and other deductions. The deduction for state and local taxes (SALT), including property taxes, is also capped. For many, the standard deduction will be the better deal, even for homeowners.
- Finally, what does home ownership mean to you? Just because buying a house might not be the best investment doesn’t necessarily mean it’s a bad purchase. If you can afford it, the emotional satisfaction and benefits of a particular home might be worth it for you in terms of location and access to activities you enjoy.
In addition, there are a number of good calculators you can use to run the numbers—the best one, in my opinion, is The New York Times buy/rent calculator. I like it because it takes the most important costs associated with buying a house and computes the equivalent monthly rent, allowing you to make an apples-to-apples comparison. The bottom line? Be realistic about the costs, run the numbers, and do what feels right for your situation.
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