A: Choosing whether to rent or own is a big decision, and there are several factors to consider.  While there’s no magic formula for figuring out the answer, you can start by asking yourself these 5 basic questions:

  • What’s your budget? Let’s say it’s $1200 per month. If you put that towards mortgage repayments, you ultimately get a return on your bricks-and-mortar investment— but you will also need to budget for insurance, upkeep and repairs. Renting means leaving all those expenses to a landlord—less hassle for you, maybe, but you are essentially throwing $14,400 down the drain each year. Ouch! One strategy you may want to consider is finding a more modest rental price of say, $800 per month; you can invest the additional $400 in stocks and get a return on your investment without the headache of home ownership.


  • Will the upfront costs of owning be worth the investment? Factor in the home price, interest rate, down payment and mortgage-interest tax deduction. In order to calculate how many years it would take before you break even and begin to see a return on your investment, do some homework with a realtor. What’s the outlook for the next 20-30 years? Although past performance is no guarantee of future results, it’s worth looking at homes in your new neighborhood and how their value has appreciated in recent years.


  • What are the costs to renting? As a carefree renter you won’t be completely devoid of financial responsibility beyond your $800 or $1200 per month. Keep in mind that you may need to pay a security deposit upfront and perhaps a broker’s fee. And don’t forget renter’s insurance.


  • How long do you want to live in your place—or in the area? If you plan to stay long-term, buying may be a better option because your initial monetary outlay is spread across several years. But if you don’t plan on staying more than a few years, renting may give you a greater sense of freedom and help you save in the long run.


  • Are you ready to take up the responsibilities of being a homeowner again? Regular costs include homeowners insurance, property taxes, utilities and general upkeep. But keep in mind—other things pop up, such as the need for a new roof or water heater. Consider buying another condo, or a townhome: General upkeep is taken care of for a monthly fee so you don’t have to do a lot of work yourself, but get to reap the benefits of being a homeowner.  There are several online calculators to help you estimate the cost of renting versus owning. Talk to a financial advisor to better understand how either choice can impact your unique financial goals.