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<h1>Is Owning or Renting Better For You?</h1>
<p>There will always be a substantial segment of the population for whom owning a home does not make sense. This is for the simple reason that they are not secure in their job and/or family situation and therefore cannot count on being able to stay in the same home for a significant period of time.</p>&#13;
<p>This is important because the transactions costs associated with buying and selling a home are substantial. Realtors typically charge a 6 percent commission on the sale price. The points charged for taking out a mortgage are typically in the 1 to 3 percent range. Many states have transfer taxes that could reach as high as 3 percent. In addition, when buying a home it is usually necessary to pay for an appraisal, a title search, a lawyer at closing, a home inspection, a surveyor, and other odds and ends.</p>&#13;
<p>In total, the costs associated with buying and selling a home will typically be around 10 percent of the price. In many areas they could be considerably more. This is a huge cost if a person cannot spread it over a long period of home ownership.</p>&#13;
<p>To take a simple example, suppose someone pays $160,000 for a house, roughly the median house price. If their transactions costs from buying and selling the home are 10 percent of the purchase price, then this comes to $16,000. If they live in the house for 10 years, this cost effectively adds $133 a month to the price of living in this house.</p>&#13;
<p>However if this person only lives in the home for two years, then the transactions costs effectively add $670 a month to the cost of living in the house. The added cost in this case is almost equal to what it would typically cost to rent a house with a $160,000 price tag. The basic story is that if someone does not reasonably expect to be in the same house for at least five years, they should probably be renting.</p>
<p>This article originally appeared in <a href="https://www.yesmagazine.org">Yes! Magazine</a> at <a href="https://www.yesmagazine.org/issue/home/2012/05/02/is-owning-or-renting-better-for-you">https://www.yesmagazine.org/issue/home/2012/05/02/is-owning-or-renting-better-for-you</a>.</p><link href="https://www.yesmagazine.org/issue/home/2012/05/02/is-owning-or-renting-better-for-you" rel="canonical"/><p>Yes! Magazine is a nonprofit, independent media organization dedicated to telling stories of ... . Learn more at <a href="https://www.yesmagazine.org">Yes! Magazine</a></p><img id="republication-tracker-tool-source" src="https://www.yesmagazine.org/?republication-pixel=true&post=16075&ga4=G-74QJNNY44Z" style="width:1px;height:1px;">

Is Owning or Renting Better For You?
There will always be a substantial segment of the population for whom owning a home does not make sense. This is for the simple reason that they are not secure in their job and/or family situation and therefore cannot count on being able to stay in the same home for a significant period of time.
This is important because the transactions costs associated with buying and selling a home are substantial. Realtors typically charge a 6 percent commission on the sale price. The points charged for taking out a mortgage are typically in the 1 to 3 percent range. Many states have transfer taxes that could reach as high as 3 percent. In addition, when buying a home it is usually necessary to pay for an appraisal, a title search, a lawyer at closing, a home inspection, a surveyor, and other odds and ends.
In total, the costs associated with buying and selling a home will typically be around 10 percent of the price. In many areas they could be considerably more. This is a huge cost if a person cannot spread it over a long period of home ownership.
To take a simple example, suppose someone pays $160,000 for a house, roughly the median house price. If their transactions costs from buying and selling the home are 10 percent of the purchase price, then this comes to $16,000. If they live in the house for 10 years, this cost effectively adds $133 a month to the price of living in this house.
However if this person only lives in the home for two years, then the transactions costs effectively add $670 a month to the cost of living in the house. The added cost in this case is almost equal to what it would typically cost to rent a house with a $160,000 price tag. The basic story is that if someone does not reasonably expect to be in the same house for at least five years, they should probably be renting.

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