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If you’re wondering whether it’s cheaper to buy or build a home, the numbers say that purchasing a house is typically cheaper, by more than six figures. That, of course, may vary with location and the kind of house you want to live in. But still, if price is your key determining factor, you’ll likely want to hit the real estate websites and open houses.

However, if you crave the process of creating a home from scratch and want total personalization, you might prefer to build. Or it might actually wind up being a better financial move than buying an existing house in your area.

Here, take a close look at this topic so you can decide which option suits you best.

Is It Cheaper to Build a House or Buy a House?

If you let the numbers tell the story, it is cheaper to buy a house than build one yourself.

In 2022, the average cost to build a house from the ground up was $644,750. The typical cost to buy a home was approximately $503,000. That’s a considerable difference.

However, prices can of course vary. If you are building a simple new home (perhaps it’s one-level living) in an area with a low cost of living, it might be quite affordable vs. buying. Much will depend on the particulars of your situation.

Cost of Buying a House

As mentioned, sales figures suggest that it is often cheaper to buy an already built house than to build a brand-new one. But, when it comes to buying an existing home, the price paid to the seller may only reflect a portion of the actual cost of home ownership.

Even if an individual can afford the home listing price, there are often additional expenses — like closing costs and any renovation or repair fees. Here’s a closer look.

Identifying Existing Wear and Tear

For pre-built homes, age is one factor. The older a house, the more likely it is to need some upkeep and extra care.

Before buying an existing house, a home inspection conducted by a certified professional can help future homeowners to stay informed about the current state of the house. You’ll want to be prepared for any major repairs or structural improvements that are needed.

Typically, the buyer is responsible for paying for a home inspection, which can add several hundred dollars to the purchasing costs. However, that can be an important look at the home’s condition and can let you know about and negotiate upcoming expenses. For instance, if the hot-water heater is nearing the end of its lifespan, the house needs rewiring, or the foundation definitely needs work, you could then try to get the seller to address some of all of the associated costs.

Evaluating Home Improvement Costs

When you buy a home, you will likely want to make some changes. Perhaps you want to install a heat pump, swap out the kitchen appliances, add a half-bathroom, strip off wallpaper, or simply buy new furniture to make the place yours.

These kinds of changes will add to the listed purchase price. For that reason, it’s often worth evaluating the cost of future alterations when estimating the cost of buying a house — whether such changes are large or small.

Ongoing Repairs, Maintenance, and Warranties

Even if repairs are not required right away, it can be useful to review the age of an existing home, along with that of its parts. When you build a home, everything is likely to be brand new. When you buy a home, you could have systems and appliances that are decades old and in rough shape.

Although buyers may not want to replace the roof at the time of purchase, mulling over the average lifespan of major home features (like roofing) can be beneficial. Some questions:

•   When were the house features last updated?

•   How well have these features been maintained? (The term “deferred maintenance” may signal you have some work to do.)

•   What will need repairs first in the near future?

Here’s one extra maintenance detail to think over: Older homes may not be as energy-efficient as newly built houses, meaning that — without upgrades to existing systems — it could cost a buyer more each month to heat and cool the house. Such ongoing and future expenditures may, over time, offset any savings received early on from buying instead of building a new home.

Cost of Constructing a New House

So, compared to buying an existing house, how can a buyer evaluate how much the cost of building a new home might be? The average single-family home costs about $150 per square foot to build. However, that figure is just a mathematical average. The individual cost can still vary greatly, depending on a home’s location, the builders chosen, property lot size, materials used, and other variables.

Calculating Construction Costs

The NAHB (National Association of Home Builders) estimates that construction costs amount to almost 61% of the average single-family new home build (finished lot costs comprise about 17.8% of sale prices). Included in these construction costs are things like:

•   Building permit fees

•   Land preparation

•   Excavation and foundation work

•   Frame construction and sheathing

•   Roofing pricing

•   Plumbing, electricity, and HVAC

•   Windows and doors

•   Appliances

•   Flooring

•   Clean-up

Put another way, if a new house costs $300,000 total, $183,300 of that would go toward construction, including materials and labor.

Recommended: The Cost of Living in California

Interior Finishes

On top of those costs, individuals interested in building a new home may also want to ponder the cost of interior finishes. According to the NAHB, interior finishes (such as walls, stairs, and doors) amount to about 24% of new home building costs.

While the actual amount will depend largely on a home buyer’s specific choices, based on this average, $76,200 of a $300,000 home would go toward interior costs, such as painting, trim, doors, plumbing fixtures, appliances, and lighting.

Pros and Cons of Building a House

While on paper it might appear cheaper to buy a house than to build a new one, it can be helpful to look deeper than just the listing price. Here, some of the pros to building your own home:

•   A brand-new house could require less maintenance and upkeep for years into the future. In many newly built homes, items such as appliances, roofing, and HVAC may be covered initially by manufacturer and construction warranties. In that case, were something to break (if under warranty), the out-of-pocket expense could be covered (and not up to the buyer to pay for).

•   A customized home may appeal on another level as well. Having a home that is designed exactly as you like can be incredibly satisfying. It can reflect your personal taste and address every need.

On the con side, consider these points:

•   When it comes to how long it will take to build a home, it’s likely a lot longer than buying one. It takes an average of 7.6 months to complete a new home, according to U.S. Census Bureau data. Not all buyers may want to wait around that long to move in.

•   As previously mentioned, building a home can be more expensive than buying one that is already built.

•   You will need to wrangle permits (or have someone do it for you) when going through the steps of building your own home.

•   With a built-from-scratch home, buyers could also run a higher risk of ballooning construction costs or extended delays, which might result in extra interim costs too. While construction on the new home is being finished up, for instance, a buyer may need to pay for another place to stay.

•   Also, there’s stress involved when delays and extra expenses crop up. You need to have time available to interact with your building team, too, which can be an issue for some people.

Pros and Cons of Buying a House

Next, let’s consider the benefits and drawbacks of buying a house. On the plus side:

•   Typically, as described above, buying a house costs less than building one.

•   If you buy a house vs. build one, you will likely be able to move in more quickly. In fact, you might even be able to move in right away, without any renovations.

•   When you buy a house, what you see is what you get. There won’t be any surprises as construction gets underway, nor any areas that don’t wind up looking the way you’d imagined they would.

Now, for the downsides of buying vs. building a house:

•   It may not be exactly the house you want, and you may not be able to remodel it to become your dream house.

•   You may have to deal with the stress of bidding wars and other nuances of house hunting, especially in a hot housing market.

•   The home you buy may have maintenance issues and may not be as energy-efficient as a new home.

Recommended: First-Time Homebuyers Guide

The Takeaway

It is typically faster and less expensive to buy an existing home vs. building one. However, whether it is cheaper to build or buy a house can come down to individual situations and variables like desired locations and home amenities or design features. For different people, the main motivating factor may vary, and the choice of buying or building will reflect a very personal preference.

If you are in the market to buy, a SoFi Mortgage Loan can offer a competitive yet flexible option. With low down payments available and terms that can suit your needs, a SoFi Mortgage Loan can get you started on the path to purchasing your very own place. Plus, the whole process is quick and easy.

Shopping for a home? Learn more about SoFi Mortgage Loans today!

FAQ

Is it cheaper to build a home or buy?

It is typically considerably cheaper to buy a home vs. building one. Recent data suggests it’s 25% pricier to build than buy.

Is building a house cheaper than buying in California?

California is an exception to the rule that it’s generally more affordable to buy than build. By building your own home in California, you could save $200,000 vs. buying.

How can I save money to build a house?

If you want to save money to build a house, you can track and reduce your spending, grow your money in a high-yield savings account, pay down high-interest debt, and also try to earn more via a side hustle.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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For many people, that monthly mortgage payment can be their biggest recurring bill. It may be the main expense that guides the development and management of their monthly budget, because that is an important bill to pay on time.

Prevailing wisdom says that your mortgage payment shouldn’t be more than 28% of your gross (pre-tax) monthly pay. But whatever that sum actually is, you may be wondering how to shave down the amount. Think about it: A lower mortgage payment could reduce your financial stress. And it can also open up room in your budget to allocate more money towards shrinking other debt, pumping up your emergency fund, and saving for retirement or other goals.

Here, you’ll learn more about your mortgage payment and possible ways to lower it.

What Is a Mortgage Payment?

A mortgage payment is a sum you typically pay every month, but it’s more than just a bill. It reflects an agreement between you and your lender that you have borrowed money to buy or refinance a home, and in exchange, you’ve agreed to pay back the sum with interest over time. If you fail to keep up with your payments, the lender may have the right to take your property.

There are typically four parts of your monthly payment: the loan principal, the loan interest (which is how the lender makes money), taxes, and insurance fees.

A mortgage payment may be a fixed rate, meaning your payment stays the same, month after month, year after year. Or it might be an adjustable rate, meaning the interest and therefore the payment can change at regular intervals.

Pros and Cons of Lowering Your Mortgage Payments

There are upsides and downsides to lowering your mortgage payments.

On the plus side, lowering your mortgage means you likely have more money to apply elsewhere. You might apply the freed-up funds to:

•   Pay down other debt

•   Build up your emergency fund

•   Put more money towards retirement savings

•   Use the cash for discretionary spending.

On the other hand, there are downsides to consider too:

•   You might wind up paying a lower amount over a longer period of time, meaning your debt lasts longer

•   You could pay more in interest over the life of the loan

•   If a lower monthly payment means you are not paying your full share of interest due, you could wind up in a negative amortization situation, in which the amount you owe is going up instead of down.

6 Ways to Lower Your Mortgage Payments

Now that you know a bit about how mortgage payments work and the pros and cons of lowering your mortgage payments, consider these ways you could minimize your monthly amount due.

Recommended: How to Pay Off a 30-Year Mortgage in 15 Years

1. Give Your Mortgage a Bonus

If you get a bonus or a windfall, consider throwing some of that money at your mortgage. If you are in a position to make a major lump-sum payment on your home loan, you may benefit from mortgage recasting.

With recasting, your lender will re-amortize the mortgage but retain the interest rate and term. The new, smaller balance equates to lower monthly payments. Worth noting: Many lenders charge a servicing fee and have equity requirements to recast a mortgage.

Other similar options:

•   Make a lump-sum payment toward the mortgage principal (say, if you inherit some money or get a large bonus at work)

•   Make extra payments on a schedule or whenever you can.

It’s a good idea to tell your lender that you want to put the extra money toward the principal and not the interest. Paying extra toward the principal provides two benefits: It will slowly reduce your monthly payment, and it will pare the total interest paid over the life of the loan.

2. Reap Rental Income at Home

You could lower how much you pay out-of-pocket for your mortgage by bringing in rental income and putting it towards that monthly bill. You’re not lowering how much you owe, but you are using your home to bring in another income stream.

There are two common methods: “house hacking” (generating income from your property) and adding an accessory dwelling unit (ADU).

•   House hacking can mean buying a two- to four-unit multifamily building for little money down and living in one of the units. Multi-family homes with up to four units are considered residential when it comes to financing. Owner-occupants may qualify for and opt for Federal Housing Administration (FHA) loans, Veterans Affairs (VA) loans, or conventional financing.

Some people house-hack a single-family home, which just translates to having housemates or short-term rental guests.

•   An ADU is another option for bringing in rental money to use towards your mortgage. This secondary dwelling unit on the same lot as a primary single-family home could be a detached cottage, a garage or basement conversion (that is, an in-law apartment or similar), or an attached unit.

With any planned addition or renovation to create an ADU, you might want to estimate return on investment — how much you’d charge and how long it would take to recoup the cash you put in before turning a profit.

3. Extend the Term of Your Mortgage

If your goal is to reduce your monthly payment — though not necessarily the overall cost of your mortgage — you may consider extending your mortgage term. For example, if you refinanced a 15-year mortgage into a 30-year mortgage, you would amortize your payments over a longer term, thereby reducing your monthly payment.

This technique could lower your monthly payment but will likely cost you more in interest in the long run.

(That said, just because you have a new 30-year mortgage doesn’t mean you have to take 30 years to pay it off. You’re often allowed to pay off your mortgage early without a prepayment penalty by paying more toward the principal.)

4. Get Rid of Mortgage Insurance

Mortgage insurance, which is needed for some loans, can add a significant amount to your monthly payments. Luckily, there are ways to eliminate these payments, depending on which type of mortgage loan you have.

•   Getting rid of the FHA mortgage insurance premium (MIP). Consider your loan origination date that impacts when you can get rid of the extra expense of mortgage insurance:

•   July 1991 to December 2000: If your loan originated between these dates, you can’t cancel your MIP.

•   January 2001 to June 3, 2013: Your MIP can be canceled once you have 22% equity in your home.

•   June 3, 2013, and later: If you made a down payment of at least 10% percent, MIP will be canceled after 11 years. Otherwise, MIP will last for the life of the loan.

Another way to shed MIP is to refinance to a conventional loan with a private lender. Many FHA homeowners may have enough equity to refinance.

•   Getting rid of private mortgage insurance (PMI) If you took out a conventional mortgage with less than 20% down, you’re likely paying PMI. Ditching your PMI is an excellent way to reduce your monthly bill.

To request that your PMI be eliminated, you’ll want to have 20% equity in your home, whether through your own payments or through home appreciation.

Thinking about starting a new home renovation project? Use this Home Improvement Cost Calculator to get an idea of what your project will cost.

Your lender must automatically terminate PMI on the date when your principal balance reaches 78% of the original value of your home. Check with your lender or loan program to see when and if you can get rid of your PMI.

5. Appeal Your Property Taxes

Here’s another way to lower your mortgage payments: Take a closer look at your property taxes. Your property taxes are based on an assessment of your house and land conducted by your county’s tax assessor. The higher they value your property, the more taxes you’ll pay.

If you think you’re paying too much in taxes, you can appeal the assessment. If you do, be prepared with examples of comparable properties in your area valued at less than your home. Or you may also show a professional appraisal.

To challenge an assessment, you can call your local tax assessor and ask about the appeals process.

6. Refinance Your Mortgage

One of the best ways to reduce monthly mortgage payments is to refinance your mortgage. Refinancing (not to be confused with a reverse mortgage) means replacing your current mortgage with a new one, with terms that better suit your current needs.

There are a number of signs that a mortgage refinance makes sense, such as lower interest rates being offered or the desire to secure a fixed rate when you have an adjustable rate mortgage.

Refinancing can result in a more favorable interest rate, a change in loan length, a reduced monthly payment, and a substantial reduction in the amount you owe over the life of your mortgage. Do note, however, that there are often fees for refinancing your mortgage.

Tips on Lowering Your Mortgage Payment

If you’re serious about lowering your mortgage payments, consider these methods:

•   Refinance to get a lower rate or other changes in your mortgage’s terms

•   Apply a windfall (a tax refund, say, or a bonus) to your mortgage’s principal

•   Reach enough equity in your home to drop mortgage insurance

•   Make extra mortgage payments or higher mortgage payments (this can build equity or pay off the loan sooner, saving you interest)

•   Ask about loan modification or forbearance programs if you are struggling to make payments.

Recommended: First-time Homebuyer Programs

The Takeaway

How to lower your mortgage payment? There are several possible ways. And who wouldn’t love to shrink their house payment? You might look at strategies to build equity and ditch mortgage insurance, extend the terms of your loan, or refinance to reduce your monthly payment.

If refinancing could help, see what SoFi offers. Both refinancing and cash-out refinancing are possible. And SoFi also offers a range of flexible home mortgage loans with competitive rates to help you make homeownership that much more affordable. Plus, our online process is fast and simple.

Ready to see how much simpler a SoFi Home Mortgage Loan can be?

FAQ

How can I make my mortgage payment go down?

There are several ways to lower your monthly mortgage payment. A few options: You could refinance at a lower rate or longer term, or you could build enough equity to forgo mortgage insurance.

How can I lower my house payment without refinancing?

To lower your house payment without refinancing, you could appeal to lower your property taxes; you might apply a windfall to lower your principal; or you could rent out part of your property to bring in more income.

What is the average mortgage payment?

According to the C2ER’s 2022 Annual Cost of Living index, the average monthly mortgage payment in the U.S. is $1,768.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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It can feel as if paying rent every month is akin to throwing money away. You don’t grow equity in a home, nor do you have a place to call your own or customize as you see fit (farmhouse kitchen sink, anyone?).

Perhaps you’re wondering if the time is right to buy a home or at least start saving for one. Maybe you’ve caught DIY fever and have ideas about what your dream home would look like and have been watching videos of how to redo a backsplash and plant some annuals. Or maybe you are planning on enlarging your family and think it’s time to become a homeowner, since a yard and playroom sure would be nice.

But there are other considerations, especially financial ones, to contemplate as well. The housing market has been hot, and pulling together a down payment plus affording a home loan may stretch your budget. Maybe renting is your best bet after all.

“Am I financially ready to buy?” is certainly one question you will likely want to answer. But it’s not the only issue. Here, learn the four signs that you may be ready to join the ranks of first-time homebuyers.

Renting a Home vs. Owning a Home: Pros and Cons

One important way to know if you are ready to be a first-time homebuyer is to consider the pros and cons of owning vs. renting.

First, take a closer look at the benefits of owning:

•  You know what your housing payments will be in terms of your mortgage amount, especially if you opt for a fixed-rate mortgage.

•  Month by month, you will build equity in your home.

•  As your equity grows, you may be able to borrow against it for other financial goals.

•  Owning a home can be a step toward building your net worth.

•  You may qualify for tax deductions.

•  On-time payments can help build your credit history.

•  You can customize your home to reflect your particular needs and tastes.

Now, here are the cons of owning a home:

•  You often need to come up with a down payment, which can be hard to save for. There are also closing costs to be paid.

•  You need to qualify for a mortgage.

•  You also need to budget for property taxes and related expenses such as insurance.

•  It will be your responsibility to pay for home repairs and upgrades, which may make having a healthy emergency fund more important. If, say, the furnace conks out, there’s no landlord to call for help.

•  Your mortgage, as well as taxes and other expenses, could add up to more than rent.

•  You are making a long-term commitment to owning a home. While, of course, you can always sell a property, it’s in your best interest to stay put and recoup closing costs and other expenses vs. picking up and moving frequently.

Next, think over the pros of renting:

•  It could be cheaper than owning. Your rent could be less than the mortgage, and you won’t have property taxes to pay.

•  Repairs and maintenance will likely be your landlord’s responsibility.

•  You’ll have the flexibility to move more easily when you want to.

•  You don’t need to come up with a down payment or qualify for a mortgage loan.

Last of all, take a look at the cons of renting:

•  You won’t be building equity in a property as you make your monthly rental payment.

•  Your net worth will not grow with rising property values.

•  You won’t have the security of ownership and its costs. Your landlord could raise your rent or decide not to rent the property any longer.

•  Your payments typically don’t build your credit history.

•  While you can likely decorate as you please, you won’t be able to upgrade or renovate as you might with a home you own. For instance, even if your landlord did allow you to get a new smart fridge, you probably couldn’t take it with you when you move.

💡 Quick Tip: Buying a home shouldn’t be aggravating. Online mortgage loan forms can make applying quick and simple.

Renting a Home vs. Owning a Home Differences

Deciding whether to buy or rent is a major decision that can involve your financial and personal needs and aspirations. Here are some specifics:

•  Renting a home offers you more flexibility in terms of when and where you move; you will likely feel less anchored in a property.

•  Renting may well be less expensive: You don’t need to come up with a down payment, and rent may cost less than a mortgage or a mortgage plus property taxes.

•  However, when you have a mortgage, you are likely building equity and wealth, which you may choose to borrow against in the future (say, with a cash-out refinance). You may not have that feeling of “throwing money away” every month on rent.

•  When you buy a home, you are on the hook for that monthly payment, but, if you have a fixed-rate loan, it is more predictable than rent which may fluctuate with the housing market.

•  As a homeowner, you would be liable to pay taxes and insurance, as well as bankroll any renovations and upgrades to your home.

•  When you own your own place, you can personalize it to suit you, whether that means putting in a spa bathroom, knocking down walls, or building a patio.

Buying a Home vs. Renting an Apartment

When it comes to deciding whether to buy a property or rent a home (say, an apartment), there is no right or wrong answer.

•  Renting is often more affordable, allowing you to save money and perhaps meet other money goals like paying down debt.

•  Renting is more flexible in most cases. If you rent an apartment, you are able to move at the end of your lease (or possibly before) without a lot of hassle.

•  When you rent an apartment, your landlord is probably covering property taxes and will be responsible for repairs, such as HVAC upgrades or a clogged sink.

That said, when you buy a home, you may find the following:

•  A bigger financial commitment may be required (down payment, closing costs, property taxes, home maintenance), but you are building equity and possibly growing your wealth.

•  You can make your place yours and renovate it to suit your taste.

•  Buying a home vs. renting an apartment can give you a sense of security: You won’t have a landlord who can raise your rent by a major amount, and you can put down roots in a community.

4 Signs You May Be Ready to Buy

If you think owning a home vs. renting is right for you, here are four signals that you may be ready to move ahead.

1. Your Budget Is Big Enough to Cover the Expenses

Home ownership isn’t all gain, no pain. Expenses may include:

•  Down payment and closing costs

•  Mortgage payments, including property taxes, homeowners insurance, and, if applicable, private mortgage insurance

•  Repair and maintenance costs, including HOA dues, if applicable.

How can you budget for these upfront and ongoing expenses? One way is to take a look at the average amount each of these costs in the housing market where you plan to buy a home to get a sense of how home-related expenses may affect your finances in the larger picture.

Doing some number crunching with a home affordability calculator may be enlightening.

You may get excited about buying a fixer-upper when watching home improvement shows. A common mortgage for such homes is an FHA 203(k), backed by the federal government, which includes money for the purchase price and some repairs and renovations.

Buyers will need to get bids for all the repairs they hope to fund with the loan. For less extensive repairs/improvements, there’s a Limited 203(k).

If the desired renovation is on the smaller side and you acquire a traditional mortgage, cash or a personal loan are options.

You can get an idea of how much your chosen home repair or improvement costs will be with this home improvement cost calculator.

💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

2. You Plan on Staying Put for a While

Buying a home signals more of a commitment to location than renting. If you’re likely to relocate in the coming couple of years, renting may be the right move.

Here’s why: If you buy a home and sell it soon after, there’s a chance you’ll barely break even. That’s because real-estate commissions and other factors will come into play. And the financial and emotional stress of selling again soon after buying can be significant. On the other hand, if you can see yourself staying put in your new home for a while, it might be a sign to start shopping.

3. You Have Good Credit

Your good or better credit profile may have been advantageous when applying for a place to rent.

The credit you’ve spent years building will likely pay off in a bigger way once you make the move to own, with improved lending terms such as a lower mortgage rate offered.

What credit score is needed to buy a house? The average American’s credit score remains in the range considered “good.” But applicants with “fair” and even “poor” credit scores can and do secure mortgages.

Here’s how credit scores are usually classified:

•  Excellent: 800–850

•  Very good: 740–799

•  Good: 670–739

•  Fair: 580–669

•  Poor: 300–579

If you’ve spent years building your credit and your number reflects that, then you might be financially ready to buy a home.

Credit score requirements for loan program eligibility and pricing can vary from lender to lender, so you may want to shop around.

4. Rents in Your Area Are High

In many markets, the rising price of rent could make buying more enticing than ever. It may be a smarter move to invest your money toward homeownership vs rent.

Two big factors to consider are:

•  How long you plan to stay in your home

•  The price-to-rent ratio, which compares the median home price and median annual rent in a given area.

Several websites (such as Zillow, Trulia, and Realtor.com) have tools that allow you to assess the dollars and cents of renting vs. buying. Estimating your break-even point of renting vs. owning a home could be another useful way to answer the question of whether it’s a good time to buy a home.

It’s best to take the calculations with a grain of salt, though. These are general estimates, and no one can predict the future of housing prices, rents, and taxes.

The Takeaway

When considering whether to buy vs. rent, there’s not one right decision. It’s a matter of which scenario suits your life and your financial situation at a given time.

Signs that you may be ready to buy a home can include having an adequate budget for the costs involved and a good credit profile, a desire to put down roots, and an understanding of the price-to-rent ratio in your target area.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What are the advantages of owning vs. renting a home?

There are several pros to owning vs. renting a home. You can build equity in your home and potentially grow your net worth. What’s more, you can personalize your home however you like. You’ll also have stability in terms of both knowing your housing costs every month (versus a surprise rent hike) and putting down roots in a community.

What are 3 disadvantages to owning a home?

There are several cons to owning vs. renting a home. You may face higher costs (down payment, closing costs, mortgage, plus property taxes). In addition, you will be responsible for home maintenance, which can be pricey and require your time and energy. You’ll likely have less flexibility in terms of moving, too.

What is the main reason to avoid renting to own?

Renting to own can be problematic if you change your mind. You can wind up losing your down payment and other charges.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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