Rent or buy what is better

The information contained in this article is intended to be of a general nature only. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances.

NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article. Skip to login Skip to main content. Search Search nab. Latest offers Personal. Notification: How was your visit to the NAB website? Provide your feedback. Download the NAB app. What to consider when deciding to rent or buy a home. It gives you more flexibility Renting gives you flexibility.

Allows you to diversify your investments Buying a home, especially for first home buyers, often means that all your savings will be going towards the one asset. Renting: the cons Renting maybe more expensive If history is a past indicator, the cost of renting will steadily increase over the years due to inflation and rise in property prices. No forced savings A mortgage is like forced savings.

Buying a house: the pros It gives you stability and freedom Buying a home provides you with certainty because there's no risk that you'll be displaced by a landlord. Rise in house prices over time Having an asset that may increase in value over time is appealing. You can use the equity in your home Home equity is the proportion of your home that you own. Ready to purchase your home? Talk to our home loan experts today. Book an appointment. Home price Your target home price. Mortgage interest rate Your mortgage rate for a fixed-rate loan.

Loan term The amount of time you have to pay back the loan. Comfortable monthly rent. More options. Property tax rate To estimate this, we use the average property tax rate for your state. Homeowner's insurance Homeowners insurance is required for most loans. Renovations The annual amount you expect to pay for home renovations.

Marginal income tax rate Marginal tax rate varies based on your income bracket. If you choose to have it, we assume it costs 1. Buying closing costs Closing costs for the buyer include lender fees, appraisals, inspections, and other costs. We estimated it as a percentage of the home purchase price.

Selling closing costs Closing costs when you sell your home include any type of agent commission. We estimated it as a percentage of the home sale price. Rent security deposit Rental deposit, returned upon move out.

Provide this as a number of months of rent. Home value appreciation The rate at which you expect the home value to grow after buying. Rent appreciation The rate at which your rent is likely to increase each year.

Whether you should rent or buy is an old-age debate that feels particularly loaded at the moment. Many people cannot afford to get on the property ladder so do not have a choice between the two. In the past 20 years the price of housing has increased at a rate that outstrips wage growth. You might want to read: Is now a good time to buy a house? You might want to read: Guide to buying your first home. A first-time buyer will find it easier to rent a house than to buy one. Rent is also now cheaper than mortgage repayments on average because of rising property prices.

If you decide to buy, try out the Times Money Mentor mortgage comparison tool. Once you have secured your mortgage, make sure you remortgage when your fixed deal comes to an end. Unless you have a fixed rate mortgage deal, when the Bank of England decides to raise interest rates, your monthly payments will probably go up too.

If you know exactly how long you want to stay in your home and where you want to live, and you have some money saved up, the decision could be as easy as calculating which option will cost you less. If your future is less clear, however, you may have more to consider. Housing markets in major cities are often far more competitive than those in small towns or rural areas. That affects the rent vs. Those high upfront costs can mean that it only makes sense to buy for homeowners who are willing to stay put for a longer timeframe.

With that in mind, SmartAsset took a closer look at the data on renting and buying in the largest U. We determined the breakeven point, the time it would take for a homeowner to recuperate those upfront costs of buying a home.

For more on our methodology, check here. Developments like the boom in tech jobs and increased migration to sunny West Coast cities have shifted housing economics towards renting in some parts of the country, while in other areas, like the South and Texas, buying is still usually the better bet.

Good deals are nearly impossible to come by and when an attractive option appears on the market, it is often snapped up in days if not hours.

That competition bids up prices, which means homes are comparatively more expensive than rentals. The typical New Yorker would need to stay in her home more than 18 years to justify buying instead of renting. The Tech Hubs San Jose: It has been especially pronounced in the Bay Area and in Seattle. The growth in high-paying tech jobs in these cities has had profound consequences on their homebuying markets.

In these three cities buying a home only makes financial sense for those who can stay put for at least 14 years on average. Take note, however, of rising rents. If rents in these cities continue to increase over the next few years, buying may become a more sensible medium-term option for those who have the cash to cover closing costs and a down-payment.

In these four western cities, the weather is great, populations are growing quickly, and renting usually beats buying. On average, homebuyers in these cities recuperate the costs of buying instead of renting after 8 to 11 years. As usual, this Oregon city defies categorization. Those factors place Portland in a middle ground between buying and renting: for the average Portlander, buying makes sense if she plans on staying put for seven years or more.

In these cities, high up-front costs tilt the economic logic away from homebuying for residents who may plan to move around in the near future recent graduates, for example.

But residents who are settling down for the long-term like more than 6. These three western cities are experiencing strong population growth, which has put some upward pressure on home prices. In these cities, residents who are comfortable staying in one place for the medium- or long-term should at least consider buying. On average, they will recuperate the high up-front costs of purchasing instead of renting in five to six years.

The average homebuyer in one of these Midwestern cities should recuperate the upfront costs of closing on a home in just over four years. Traditionally the most affordable parts of the country for homebuyers , Texas and the south lived up to their reputation in our analysis.

In every major southern or Texan city we examined, the average resident would recuperate the up-front costs of homebuying within just four and a half years of closing. After that, the savings would begin to accumulate. These two cities buck all the trends. The result is a housing supply far larger than demand, and, in turn, bargain basement prices. On average, a resident of either of these cities should only stay in a rental if she might be moving in the next 3 years.

The counties identified below are the places where buying makes more financial sense than renting in the shortest period of time. Methodology To find the best places to own a home, SmartAsset analyzed data on rent and home prices in counties across the U.

For each county, we calculated the breakeven point in the buy vs. The counties with the shortest amount of time needed to break even are the best places to own a home. What is an Index Fund? How Does the Stock Market Work? What are Bonds? Investing Advice What is a Fiduciary? What is a CFP? I'm an Advisor Find an Advisor. Your Details Done. Knowing your location will help us calculate property taxes and home prices.

Do this later Dismiss. Monthly Rent. This helps us compare your monthly rental costs against your total monthly owning costs.