The headlines:

  • Renting may give you the time you need to build up savings to buy a house
  • Regardless of owning or renting, you should build liquid savings for the most flexibility

Buying vs. renting might be the ultimate young adult death match decision. Which one makes the most financial sense? What choice is right for you specifically?

While for previous generations, homeownership traditionally came after the wedding and before the 2.5 kids, many first-time homebuyers find themselves asking if that path is right for them.

Buying vs. Renting: A Financial Showdown

You may have heard a lot of things about what both renting and buying a home means for your money.

People are even wondering if young adults are killing the real estate market, just like they allegedly killed Applebee’s and napkins. But the question of should you buy or rent a house is a highly personal decision.

‘Renting is just throwing your money away’ for example, is a pretty common phrase that gets repeated a lot.

What people who say this usually mean is that when you pay a mortgage each month, your payment goes toward building equity in the home. When you pay rent each month, your money goes to the landlord’s pockets.

But, as a renter, you don’t have to worry about replacing the air conditioning when it goes out (which can easily be $5,000), and you don’t have to worry about paying property taxes, which can change year-to-year. Those are the landlord’s problems.

Let’s look at some of the pros and cons to both renting and buying.

Is Buying a House Better than Renting?


  • Build equity (aka ownership in your home)
  • Interest rates on mortgages are historically low
  • You’re in control. You can do what you want with the property


  • Saving enough for a down payment (20% down to avoid private mortgage insurance)
  • Upkeep and maintenance Taxes and homeowner’s insurance factor into the cost (not just the list price)
  • Longer term commitment — may not be able to sell quickly for the price you want if you need to move fast

Buying a house might be the most expensive purchase you ever make, so it’s a decision that shouldn’t be made lightly.

Historically, homeowners have been encouraged to put 20% of the home price as the down payment. This gives the owners immediate equity in the home, as well as lets them avoid paying private mortgage insurance.

Private mortgage insurance (“PMI”) is a monthly insurance charge for those who don’t put 20% down for their home. It typically costs between .5% and 1% of the entire loan amount on an annual basis — until you reach 20% equity in the home. If putting 10% down allows you to get a great deal on a home you love, paying PMI might be well worth it.

Homeownership comes with more costs than the down payment.

Before you fall in love with the perfect home on Zillow or Redfin, ask yourself these questions:

  • Can I comfortably afford the monthly mortgage payment?

  • Will I also be able to save for a house emergency fund (for when the dishwasher inevitably breaks or the shower clogs)?

  • What are my annual property tax and insurance costs?

  • If I don’t put 20% down, what will my PMI be?

Owners also have the opportunity to generate income by renting out rooms.

Someone who owns a three bedroom home and rents out two of the bedrooms could cover some or all of their mortgage with that rent.

If you can’t manage all of the expenses listed above, then owning might not be for you. Owning a home is best for those who know they are dedicated to staying in one spot for at least five years, who can build savings for home repairs, and who are interested in managing the duties of being a homeowner.

Is Renting Better than Buying?


  • Less maintenance and upkeep
  • Less expensive to get started (typically first and last month + security deposit)
  • Easier to relocate


  • Someone else has control over what you can and can’t do to the property
  • Your rent increases the owner’s equity
  • Rent can be expensive and change year-to-year

Renting means never having to fix your own leaky pipes.

Renters usually have to come up with the first and last month’s rent and a security deposit up front, as well as possibly an application fee and a pet fee. Depending on where you rent, you may also be looking at laundry, parking, broker fees, and renters insurance.

Certainly these costs are much less than a down payment will run most people, and renters are not tied to one location.

When their lease ends they can move across town, or across the country without the hassle of selling their property.

However, renters are at the whim of their landlords.

If rent goes up, they have to pay the increase or move. Renters may or may not be able to make cosmetic changes to their home, meaning they might have to live with drab brown walls they hate.

Renting is usually best for those who know they will be moving in the next few years, who don’t want the responsibility of repairing a home, and who aren’t sure they love the area they’re currently in.

Smart Money Moves Whether You Buy or Rent a House

No one ever said ‘I have too much money saved.’

If you do plan to own a home one day, aim to start saving while you rent. Short-term savings (meaning you plan to use the money in 1-4 years) should be kept in relatively conservative accounts.

If you’re 5 or more years away from buying a house, a low or no risk investment account can be a good place to stash your savings.

Make recurring contributions to your home savings account if you can.

You may save with the idea of homeownership in mind, but even if that money ends up funding a cross country move or a move into a nicer rental, you’ll be glad you have it. Liquid savings just means more options.

Automatic payments can help build that fund without too much of your attention.

You may save with the idea of homeownership in mind, but even if that money ends up funding a cross country move or a move into a nicer rental, you’ll be glad you have it.

Liquid savings just means more options.

To make the savings process easy and to give yourself the flexibility that comes with cash on hand, find a tool like Twine that allows you to save automatically.

With Twine you can also save with a partner, making it perfect for many first-time homeowner couples. You and your partner can each contribute an amount that makes sense for each of your incomes.

Put your money to work.

Try Twine