The 5 key questions to ask yourself about this major decision.
Fidelity Viewpoints
Key takeaways
Whether you buy or continue to rent can have important implications for both your finances and happiness.
As you're weighing your decision, try comparing prices and rents in your area, and think about how long you'd likely stay in a home.
If you're running the numbers, make sure you consider the full costs of ownership, such as maintenance, taxes, and insurance.
Many renters dream about eventually owning their own home. There can be many perks to becoming a homeowner—from having more control over your space to building equity and potentially benefiting from rising home values. But it also might be one of the biggest financial commitments you'll ever make, and it's not the right move in every situation.
Read on for 5 key questions to consider as you're weighing this momentous decision of if you should rent or buy. (In addition to answering these questions, try Fidelity's rent vs. buy calculator for a look at how the numbers stack up in your particular situation.)
1. Are you truly in a financial position to buy?
Why it matters: If buying overstretches your finances, you might be less able to cope with a financial emergency or save for other important goals like retirement. Plus, an inadequate down payment or subpar credit score might leave you at a disadvantage if you're trying to get an offer accepted in today's competitive buying market.
What to consider: The relevant aspects of your finances include:
Your income: If you don't have stable, sufficient income, it might not be the right time.
Your down payment: Remember that you typically need a down payment of at least 20% to avoid paying for private mortgage insurance (which protects your lender if you're unable to make your mortgage payments).
Your credit score: Without solid credit, you might not qualify for a favorable mortgage rate or even be approved for a loan in the first place.
Your other debts: One guideline is that your total monthly debt payments shouldn't exceed 36% of your pretax income. If you have other debt, there may be less room in your finances for mortgage payments. (Learn more about figuring out how much house you can afford.)
2. Will you stay in your home for at least a few years?
Why it matters: When you buy, you'll face a boatload of one-time expenses, like broker fees, mortgage origination fees, and title insurance. The longer you stay put, the more time you have to spread out those costs and for your home to potentially rise in value.
What to consider: If you're planning to stay less than 3 years, it likely doesn't make financial sense to buy. (Staying less than 2 years can come with particular tax disadvantages, because you generally won't qualify for a capital gains tax exclusion. This means you'll owe capital gains tax on the full amount of any increase in your home's value.)
Sign up for Fidelity Viewpoints weekly email for our latest insights.
Subscribe now
3. Does renting or buying offer better value in your area?
Why it matters: You might assume buying is a better value because it lets you build equity in a home. But that may not be the case if rents are low relative to purchase prices in your area.
What to consider: In any comparison, first make sure you're looking at similar properties in the same area (i.e., don't weigh renting your city studio against buying that country cottage). Then you can compare the renting and buying price tags with:
The price-to-rent ratio: Take a monthly rent figure and multiply it by 12, so it's an annual number. Divide the purchase price of a similar property by that annual rent number. A ratio greater than 20 generally weighs in favor of renting, while a figure less than 20 generally favors buying.
Fidelity's rent vs. buy calculator: Plug these rent and purchase figures, in addition to your down payment and income, into our handy calculator.
Some people decide with their guts. Others want a detailed analysis. If you're in the latter camp, here are some finer points to keep in mind as you're calculating your rent vs. buy comparison:
Factor in the full costs of ownership. In addition to mortgage payments, you'll face property taxes, insurance, routine maintenance, and occasional larger upgrades. (One guideline is to estimate maintenance costs at 0.5% of the home's value per year.)
Double-check on that mortgage interest deduction. It won't make sense for you to deduct interest unless all your itemized deductions are greater than the standard deduction (which in 2023 is $13,850 for individuals and $27,700 for married couples filing jointly).
Consider your next-best use for that money. Remember that a home isn't the only way to build equity. If renting is cheaper, you could invest the money you save by renting in a diversified portfolio to potentially build wealth over time.
4. Would you still want to buy if your home's value doesn't rise?
Why it matters: Although home prices have historically risen over long periods, there's no guarantee that they will in any given time frame or in any particular area. Plus, what matters for you will be the value of your specific property, which can be influenced by everything from the local economy to whether your neighbors take good care of their lawns.
What to consider: Think about how you'd feel if your home's value didn't budge over 10 years or didn't rise as much as inflation. If you buy, you'll need to accept the possibility that your home won't be a great investment.
5. What does your heart say about renting vs. buying?
Why it matters: Buying a home isn't just a financial transaction. It's also a source of added responsibility, and for many people, pride and satisfaction. You want to make a decision that you can feel good about years down the line.
What to consider: Ask yourself if you feel ready for the level of commitment that owning a home entails. If being on the hook when the basem*nt floods or the roof leaks terrifies you, it could be you're not quite there yet. On the other hand, if you know you want to put down more permanent roots, then you might be ready to take the next step.
Ultimately, the numbers can help you decide, but they can't decide for you.
Looking to bring your homeownership dreams closer to reality? Consider setting up a savings goal to help you build your down payment or learn more about the steps in the homebuying process.
Good news, you're on the early-access list. But we're not available in your state just yet. As soon as we are, we'll let you know. In the meantime, boost your crypto brainpower in our Learning Center.
Manage subscriptions
Oh, hello again!
Good news, you’re already on the early-access list. Keep an eye on your email for your invitation to Fidelity Crypto.
Manage subscriptions
All fields are required.First name
Enter your first name.Enter your first name.First name must be no more than 30 characters.First name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Last name
Please enter a valid last name. e.g. Doe.Enter your last name.Last name must be no more than 30 characters.Last name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Email address
Enter a valid email address. e.g. name@fidelity.com.Enter your email address.Enter a valid email address (like name@fidelity.com).Email address can not exceed 100 characters.Please enter a valid email address. e.g. name@fidelity.com.
Subscribe Subscribe
Thank you for subscribing.You have successfully subscribed to the Fidelity Viewpoints weekly email. You should begin receiving the email in 7–10 business days.We were unable to process your request.Please Click Here to go to Viewpoints signup page.
All fields are required.First name
Enter your first name.Enter your first name.First name must be no more than 30 characters.First name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Last name
Please enter a valid last name. e.g. Doe.Enter your last name.Last name must be no more than 30 characters.Last name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Email address
Enter a valid email address. e.g. name@fidelity.com.Enter your email address.Enter a valid email address (like name@fidelity.com).Email address can not exceed 100 characters.Please enter a valid email address. e.g. name@fidelity.com.
Subscribe Subscribe
Thank you for subscribingNice work! Need to edit for crypto.We'll be in touch soon. In the meantime, visit Need to edit for crypto to stay up to date.We're unable to complete your request at this time due to a system error. Please try again after a few minutes.
All fields are required.First name
Enter your first name.Enter your first name.First name must be no more than 30 characters.First name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Last name
Please enter a valid last name. e.g. Doe.Enter your last name.Last name must be no more than 30 characters.Last name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Email address
Enter a valid email address. e.g. name@fidelity.com.Enter your email address.Enter a valid email address (like name@fidelity.com).Email address can not exceed 100 characters.Please enter a valid email address. e.g. name@fidelity.com.
Subscribe Subscribe
Thank you for subscribing.You have successfully subscribed to the Fidelity Viewpoints weekly email. You should begin receiving the email in 7–10 business days.We were unable to process your request.Please Click Here to go to Viewpoints signup page.
All fields are required.First name
Enter your first name.Enter your first name.First name must be no more than 30 characters.First name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Last name
Please enter a valid last name. e.g. Doe.Enter your last name.Last name must be no more than 30 characters.Last name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Email address
Enter a valid email address. e.g. name@fidelity.com.Enter your email address.Enter a valid email address (like name@fidelity.com).Email address can not exceed 100 characters.Please enter a valid email address. e.g. name@fidelity.com.
Subscribe Subscribe
Thank you for subscribing.You will begin receiving the Fidelity Viewpoints Active Investor newsletter.We were unable to process your request.Please visit www.fidelity.com/viewpoints.
All fields are required.First name
Enter your first name.Enter your first name.First name must be no more than 30 characters.First name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Last name
Please enter a valid last name. e.g. Doe.Enter your last name.Last name must be no more than 30 characters.Last name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Email address
Enter a valid email address. e.g. name@fidelity.com.Enter your email address.Enter a valid email address (like name@fidelity.com).Email address can not exceed 100 characters.Please enter a valid email address. e.g. name@fidelity.com.
Subscribe Subscribe
Thank you for subscribing.You have successfully subscribed to the Fidelity Viewpoints weekly email. You should begin receiving the email in 7–10 business days.We were unable to process your request.Please Click Here to go to Viewpoints signup page.
All fields are required.First name
Enter your first name.Enter your first name.First name must be no more than 30 characters.First name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Last name
Please enter a valid last name. e.g. Doe.Enter your last name.Last name must be no more than 30 characters.Last name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Email address
Enter a valid email address. e.g. name@fidelity.com.Enter your email address.Enter a valid email address (like name@fidelity.com).Email address can not exceed 100 characters.Please enter a valid email address. e.g. name@fidelity.com.
Subscribe Subscribe
Thank you for subscribingNice work! Get ready to unleash your inner investor.We'll be in touch soon. In the meantime, visit Women Talk Money to stay up to date.We're unable to complete your request at this time due to a system error. Please try again after a few minutes.
All fields are required.First name
Enter your first name.Enter your first name.First name must be no more than 30 characters.First name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Last name
Please enter a valid last name. e.g. Doe.Enter your last name.Last name must be no more than 30 characters.Last name must be at least 2 characters.Sorry, we can't update your subscriptions right now. Please try again later.
Email address
Enter a valid email address. e.g. name@fidelity.com.Enter your email address.Enter a valid email address (like name@fidelity.com).Email address can not exceed 100 characters.Please enter a valid email address. e.g. name@fidelity.com.
Subscribe Subscribe
Thank you for subscribingNice work! Get ready to unleash your inner investor.We'll be in touch soon. In the meantime, visit Women Talk Money to stay up to date.We're unable to complete your request at this time due to a system error. Please try again after a few minutes.
Thanks for subscribing to
Looking for more ideas and insights? You might like these too:
Looking for more ideas and insights? You might like these too:
Fidelity Viewpoints®
Timely news and insights from our pros on markets, investing, and personal finance.
Decode Crypto
Clarity on crypto every month. Build your knowledge with education for all levels.
Fidelity Smart Money℠
What the news means for your money, plus tips to help you spend, save, and invest.
Active Investor
Our most advanced investment insights, strategies, and tools.
Insights from Fidelity Wealth Management℠
Timely news, events, and wealth strategies from top Fidelity thought leaders.
Women Talk Money
Real talk and helpful tips about money, investing, and careers.
Educational Webinars and Events
Free financial education from Fidelity and other leading industry professionals.
Fidelity Viewpoints®Timely news and insights from our pros on markets, investing, and personal finance. Decode Crypto Clarity on crypto every month. Build your knowledge with education for all levels.Fidelity Smart Money℠What the news means for your money, plus tips to help you spend, save, and invest. Active Investor Our most advanced investment insights, strategies, and tools.Insights from Fidelity Wealth Management℠Timely news, events, and wealth strategies from top Fidelity thought leaders. Women Talk Money Real talk and helpful tips about money, investing, and careers. Educational Webinars and Events Free financial education from Fidelity and other leading industry professionals.
Take the value of the home you are considering, multiply it by 5%, and divide by 12 months. If you can rent for less than that, renting may be a sensible financial decision. For example, you could estimate about $25,000 in annual, unrecoverable costs for a $500,000 home, or $2,083 per month. It goes the other way, too.
The price-to-rent ratio: Take a monthly rent figure and multiply it by 12, so it's an annual number. Divide the purchase price of a similar property by that annual rent number. A ratio greater than 20 generally weighs in favor of renting, while a figure less than 20 generally favors buying.
Renting a home provides much more flexibility. However, if you have returned to the office, either full time or partially, and assume you'll remain in your current job for a few years, then buying a home might be wiser.
If you're looking to purchase an appreciating asset, buying makes more sense. If you choose to rent an asset that goes up in value (such as a classic car or other collectible), the owner will benefit from any increase in value, not you.
Introduction: My name is Rev. Leonie Wyman, I am a colorful, tasty, splendid, fair, witty, gorgeous, splendid person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
