Rent vs. Buy? Which is the Better Decision for You?

Renting an apartment or home has its benefits. At some point, however, people may wonder whether the time is right to shift toward homeownership. In the current market, there are a number of reasons to consider buying a property. Home prices are strengthening, mortgage rates are hovering at or near record lows and rental rates have experienced double-digit increases in some markets. While these factors may push more people toward taking on a home loan, there are still a number of considerations potential buyers should take into account when making a final decision.

"Cost is typically the most immediate element consumers consider, but a common mistake is to look at the upfront price, while ignoring long-term expenses," said Howard Dvorkin, CPA and founder of ConsolidatedCredit.org.

When considering a house, for example, many buyers calculate the purchase price, interest rates and closing costs. However, they may forget to factor in utilities, maintenance, furnishings, trash pick-up and association fees, if applicable. The cost of heat, air and electricity will be more expensive for a home than a smaller apartment. As there may be less space in an apartment, it's also cheaper to furnish it than a house. In addition, renters have the benefit of contacting their landlord when there is a plumbing problem, a fixture needs to be replaced or the walkway needs to be shoveled after it snows. These amenities will be up to the homeowner if they purchase property.

Price is not the only factor that should be taken into account. Consumers who are facing job uncertainty or frequently relocate for work should determine how long they plan to stay in their current location. While breaking an apartment lease can be costly, it's significantly easier to get out of than a mortgage. The housing market has made gains in recent months, but it may still be challenging to sell a home in a buyer's market, especially if workers must relocate quickly. Further, it may take years to see a strong return on a home investment. For these reasons, those who plan on staying in a home for less than five years, it may make more sense to look for a more temporary housing solution.

Making the decision

Consumers who are unsure of whether to buy or rent may benefit from enrolling in housing counseling to discuss their options with a professional. Counselors can help potential buyers determine how much they can afford and what their budgets would look like if they bought a home or chose to continue renting.