You’ve made the huge decision to move into a house, but after all that thought and weighing of priorities, there’s still one more question looming over you-should you buy or rent?

Buying Costs More

Your current financial situation will be the best determining factor when making this decision.  The pros and cons of each will weigh differently on your available income.  The most obvious issue is that owning a home will definitely cost more than renting.  Of course, it will be dependent on where you live, but the cost of renting vs. buying within one city will tend to be vastly different.

On the flip side, when you rent, your landlord can raise your rent, but when you own with a fixed-rate mortgage, your lender cannot raise your rates.  However, the longer you wait to buy, the higher home prices can go in the meantime, and they tend to rise faster than average rent costs.

Building Equity

There are some perks to buying that you can’t get with renting.  First of all, you can deduct part of your interest paid if you exceed the standard deduction, which you usually will for the first few years, when your payment will mostly go toward interest.  You’ll also build equity, which you can take out a line of credit against to help pay down debt, pay for college, etc.

But when something breaks or starts malfunctioning (and it will), you don’t have a landlord to call to fix it for you.  It’s your problem, and you get to use your own money for the repairs.  Plus, if your finances take a turn for the worst, you could end up risking foreclosure and a nasty hit on your credit score.

Save Money While Renting

If you’re looking to buy and you can’t put 20% of the home’s value toward a down payment, you’ll end up with a high interest rate and have to pay for private mortgage insurance to protect the lender if you foreclose, so renting may be a better option to start.  You could even lease with an option to buy when the term is up.  This can give you time to save enough money for a down payment.

Determine how long you intend to stay in the home you’re considering.  If there’s any possibility you’ll be moving again after a few years, you might want to rent since you won’t have time to build up any equity in the house anyway.  But if you’re content to stay put, your home can appreciate in value, and owning will allow you to pull the equity out once it builds up.

The decision will ultimately come down to your current financial situation.  Don’t count on any “expected” income or change in situation that isn’t secured.  A lender cannot make the decision for you on whether to buy or rent, so make sure you do your homework before taking the first step.