Pros & Cons of Owning a House vs. Renting an Apartment

For many, buying a house is part of the American dream and essential to personal and financial success. The security and satisfaction that comes from owning their own house outweighs other considerations. However, homeownership brings with it advantages and disadvantages compared to apartment renting. Although there are plenty of reasons to buy a house, there are also several viable reasons for renting an apartment.

A house is the proverbial castle for you and your family. You are mostly free to do with your home and land what you like. Having a yard is one of the main benefits of owning a house. Many suburban areas are perceived to be safer and have better schools than urban areas, which is where you are more likely to find a higher density of apartments and more crowded housing conditions. A house can also provide more privacy than apartment living.

A house and yard require maintenance. This ranges from minor maintenance like mowing the lawn and shoveling snow to major repairs like replacing a roof. Property maintenance costs money and takes time, even for handy homeowners. Although you might buy a home intending to stay for the long-term, if you unexpectedly have to move, it can be difficult to sell and market conditions are not always favorable for sellers.

You pay interest on a mortgage, but the principal that you pay each month helps to build equity in your home, which you can draw upon through a home equity loan or when you sell. Any increase in your home's value from renovations or rising home prices also increases equity. You can also write off mortgage interest payments at tax time. Expenses to consider when buying a home include homeowners insurance, mortgage insurance if paying less than 20 percent down, property taxes, homeowners association fees and maintenance costs. A large benefit, however, is that you may one day pay off your loan or at least build a considerable amount of equity.

While it might seem like rent is wasted money, it's going towards a service. Because you do not own your apartment and don't usually have to complete or pay for maintenance and repairs, you save money. Depending on your needs, you may be able to find apartments that have a laundry in the building or in the unit, a gym and pool facilities and some apartments may even come furnished. If you have a short-term or month-to-month lease, you have flexibility if you need to move.

Because you don't own your apartment, you may not be able to set it up quite the way you want. Even if you are allowed to make changes, renovations you make financially benefit your landlord and not you. You also have significantly less space compared to a house. Your rental agreement may have restrictions such as limiting or banning pet ownership. There is also the possibility of eviction, or your landlord deciding not to renew your lease, in which case you have to move.

Renting an apartment can be, but isn't always, less expensive than homeownership and its related costs. You can use a price-to-rent ratio to determine if renting makes financial sense. If the price to rent a house for one year is one-twentieth or less than the cost to buy the home, renting is a better deal. If you are saving money living in an apartment, that money can go toward investments that can give greater dividends than buying a home. That invested money is generally more readily accessibly than home equity.