Pros and Cons of Buying a House

Buying a home is the biggest financial decision many people make. As with any major decision, a key question to answer before proceeding: Why?

Perhaps your why is a larger home to raise children, have a yard, move into a better school district, or get your new home office for remote work. There is no right or wrong answer, merely the best one that fits each individual circumstance.

“There is an emotional side to home ownership, particularly in the United States – it’s often baked into people’s vision of the future or part of the American dream,” said Tom Figgatt, president of Portolan Financial in New Orleans. “And it does feel good to own your own house; you can feel like it is a home and not just a temporary dwelling.”

The benefits of home ownership come with costs and limitations. For some, renting may be a better option. Consider the pros and cons of buying a house as you think through the process and before you make a decision. You can also read our homeownership guide to help you through your process.

The average sale price of a house in the United States hit a high mark in 2024 ($682,180), according to the Federal Reserve Bank of St. Louis, which tracks housing costs. The market was a boom for sellers, but rising interest rates slowed demand and lowered prices. With the lowering of the prime interest rate in 2024, mortgage rates could come down enough to recharge the housing market.

Pros and Cons of Owning a House

Before you make the major financial investment of buying a house, make sure you’re the type of person who is right for ownership. Are you someone who likes to take care of the yard and can provide some do-it-yourself maintenance? Do you relish the idea of re-shaping a house to your idea of an ideal home?

Or are you someone who likes the idea of someone else (a landlord) paying for any upgrades and being responsible for any major expenses, such as paying for a new roof, upgrading the plumbing, and putting in new floors?

Here is a summary of the pros and cons to consider as you ponder buying a house.

Pros & Cons of Owning a House

What Are the Benefits of Owning a Home?

Historically, the biggest advantage of owning a home is long-term financial security. For decades, home ownership in America represented stability because the housing market almost always went up in value, rewarding homeowners with equity and also a way to borrow money, should the need arise.

But there are intrinsic advantages as well, such as control. If your family grows, you have the power to add a bedroom or bathroom to your house. Or expand the kitchen. Or widen your driveway to accommodate more cars as your family grows. There are also tax benefits and other financial benefits to home ownership.

Property Growth and Long-Term Investment

According to the Federal Reserve Bank of St. Louis, the average U.S. home price nearly doubled – rising a staggering 97% – from 2014 to 2024. For many homeowners who opted to sell during the past decade, the market growth provided remarkable equity. History shows a constant fluctuation of overall home prices and even periods of decline or flatness. Homes can lose value, but it doesn’t happen often. Long-term, housing is an investment sector that rarely disappoints.

Building Equity

Your equity is the difference between what you can sell the home for and what you owe. Equity grows as you pay down your mortgage. Over time, more of what you pay each month goes to the balance on the loan rather than the interest, building more equity.

Equity also becomes a real asset in other financial transactions. If you apply for a loan, your options are better if you have significant equity in your portfolio. Not only will it help you get a loan approved, but you may also qualify for lower interest rates and better terms. When you reach retirement age, your home can be a comfortable place to live or an asset to sell to improve your financial picture, or both.

Federal Tax Benefits

Mortgage interest is deductible on the first $750,000 of the purchase price of the home, as is interest on home equity loans, property taxes up to $10,000 if married ($5,000 if married filing separately) and some closing costs at purchase time. However, the increase in the standard deduction to $27,700 for married couples ($13.850 if single) makes it a little tougher to itemize those interest deductions. Calculating all these numbers prior to purchase will help show what tax benefits you can gain.

If you work at home, even some percentage of the time, and you have a dedicated home office, you may be able to deduct its cost from your federal income tax. That means calculating the percentage of your overall square footage that constitutes a workspace.

These tax breaks effectively lower the overall cost of home ownership in ways that are not available to renters.

Stability and Security

A fixed-rate mortgage means you’ll pay the same monthly amount for principal and interest until the mortgage is paid off. Rents can increase at every annual lease renewal. Fluctuating property taxes or homeowner’s insurance can change monthly payments, but that typically doesn’t happen as often as rent increases.

Homeownership provides a sense of permanence, complete with a feeling of control over your day-to-day life. Being a tenant means being limited by lease terms and being subject to potential relocation.

People tend to stay longer in a home they buy, if only because buying, selling, and moving is difficult. Buying a home requires confidence that you plan to stay there for several years, especially if your family grows and children become comfortable with schools, friends, and their living space.

Improve Your Credit

Your credit rating is basically a measure of your trustworthiness in the eyes of banks or credit card companies. Making regular monthly payments on a home can help raise your credit score. That, along with stability and increasing equity in your home, will impress potential lenders.

Not only can homeownership help you to improve your credit score, it can help you qualify for better loan terms and lower interest rates on future credit.

Freedom to Personalize

Sign a lease and you have a place to live but very strict rules about making changes to your home.

Sign a mortgage and you have a lump of clay to mold in any way you like (or at least can afford or have the skills to accomplish). You can add or knock down a wall, remodel the kitchen or bathroom, and paint or decorate the walls without having to worry about restoring them to plain white when you move out. You can plant flowers or build a fence or deck – as long as you follow local building codes and obtain necessary permits.

Some neighborhoods are regulated somewhat by homeowners associations (HOAs), which have rules or guidelines for outside alterations, but anywhere you buy a house, the interior is all yours to make it more beautiful, more functional, or more comfortable as you see fit.

What Are the Disadvantages of Owning a Home?

The disadvantages of owning a home mostly fall into the category of permanence, with a dash of financial uncertainty. Buying a new house costs money, and a lot of that money comes out of your pocket at the time of the purchase. Later, there are no guarantees that home prices will rise. And without a large down payment, it can take years for your home equity to accumulate.

Besides money, owning a home can be an anchor. If the housing market is down, you might not be able to sell or move when you want — or at the price you desire. If you are just starting out in your career and you’re not certain you live in a place where you want to be for a long time, home ownership can be an obstacle to finding a new job elsewhere.

Let’s look at some specifics.

High Upfront Costs

People often save for years to amass enough money to enter the home ownership club. The admission fees are significant and can make home ownership beyond reach for many people.

These challenges start with saving enough for a down payment, which is usually a percentage of the total purchase price. A 20% downpayment on a $400,000 house is $80,000 – a significant amount for anyone to save. But the down payment is only the beginning of the upfront costs.

Closing costs on a mortgage can run from 2% to 5% of the purchase price, including numerous fees:

• Property taxes
• Mortgage insurance
• Home inspection costs
• First-year homeowner’s insurance premium
• Title search
• Title insurance
• Points, which are prepaid interest on the mortgage

It can take about five years to recover those costs.

Less Mobility

This is the flip side of stability. If you want or need to be able to move quickly, home ownership can become an impediment. An attractive job offer that requires you to relocate sounds like a no-brainer unless you have a house and mortgage. Selling a house, at a desirable price, can take some time.

For the past few years, homes have sold relatively quickly with prices favorable to the seller. Those trends are cyclical, though, and not guaranteed to last. Meanwhile, if you plan to buy a home in your new area, you will be on the other side of the buyer/seller fence.

If your career requires frequent moves, or if you just value your flexibility, buying a home may not be the best option for you. At the least, you’ll want to consider those factors when making decisions on whether to buy a house.

Maintenance Costs

Contorting yourself to fit under the kitchen sink to fix a leak is a joy (not) for those who try it the first time. But when you own a home, you are the first line of repair – especially if you want to save money by doing it yourself, Bob Vila style.

Some items do need professional attention. If the air conditioner goes out, you’re not only going to sweat until it’s fixed, but you’ll also be writing a check to get the cool air flowing again. Some folks enjoy mowing the lawn; others don’t.

That, and putting a new coat of paint on the house, trimming the bushes, cleaning the gutters, and shoveling the snow, are all part of home ownership.

Property Values Can Fall

In general, buying a home is an investment that will continue to grow in value. But there can be times when property values fall (while your monthly mortgage payment stays the same).

That happened during the 2008 nationwide housing crisis, and more local conditions can cause this, too. Your building will depreciate over time, especially if you don’t maintain it.

If you can ride out such a downturn and wait for the housing market to rebound, that’s one thing. But if you have to sell your home during such a downturn, it can cost you serious money. Buying a home is one of the safest investments you can make, but that doesn’t mean there is zero risk.

Financial Commitment

Once you make the initial investment into a new home, and then continue to make monthly mortgage payments plus property taxes and insurance, you will find yourself in a long-term relationship – with your property.

That can be positive, giving you good standing financially and a home to build a life in. But it can also be stressful or limiting, especially in the face of unexpected life changes. Changes in health, employment, or marital status can be complicated by the commitment to a home.

Advantages and Disadvantages of Renting a Home

Home ownership isn’t for everybody, at least not in every stage of life. Before you buy, consider whether it’s right for you now.

Another option is to seek a rent-to-own situation in which you sign a rental agreement for a short period (12, 18, or 24 months) with an option to purchase the property at the conclusion of the lease. In some cases, in exchange for a decision to buy, landlords will agree to apply some of your previous rent payments toward a down payment on the home or give you immediate equity.

Regardless, just as there are pros and cons of home ownership, there are also plusses and minuses of renting.

Advantages of Renting a Home

• Rent payments may be lower: This certainly can be true if you’re renting an apartment, and it also may be the case when renting an identical house. If a mortgage is more than you can afford, renting makes more sense than being stretched too thin financially.
• Repairs aren’t your responsibility: The property owner has to pay for that leaky faucet and anything else that breaks or wears out. So, you don’t have to factor those unplanned expenses into your budget.
• Flexibility: Your obligation to a place you rent can’t exceed the length of the lease, and if the property owner can quickly find a new tenant, that can get you off the hook if you leave before the lease expires.
• Low upfront costs: There is no down payment. Except for a security deposit – often the cost of a month’s rent – you don’t have to write a big check or finance the costs required to get a mortgage.
• No HOA dues: Some homes are in developments with homeowner’s associations that require monthly dues on top of all the other expenses, and they aren’t optional. Not so with renting.

Disadvantages of Renting a Home

• It can be difficult to change the property: Would you like a deck for entertaining? Would you prefer a fenced yard? Want to paint the bedroom a grayish blue? Often there’s little you can do about these issues with a rental. Unless significant changes to the property are explicitly outlined in the lease, you must get permission from the landlord to address your desires. Landlords sometimes don’t trust tenants to make “improvements.” But sometimes they do.
• You aren’t building value: When you leave your rental, all you take with you is yourself and the furniture and dishes that belong to you. It’s the property owner’s equity that grows, not yours.
• Rent may increase: You may be comfortable with what you’re paying each month, but that could change when your lease comes up for renewal, typically in six months or a year.
• No credit score improvement: While paying a mortgage on time improves your creditworthiness, you don’t get the same benefit from rent.
• No cosmetic improvements: If the home you are renting looks dated, you may just have to get used to it.

Owning vs. Renting

In assessing the pros and cons, Tom Figgatt suggests asking yourself three questions.

1. Can you afford it?

“The down payment, closing costs, and risk of sudden, very large expenses popping up combine to make it a very expensive proposition,” Figgatt said. “You need to save above and beyond your mortgage payment for infrequent yet major household expenses so that you keep it up properly. And making a smaller down payment and paying private mortgage insurance (which protects a lender in case you default on your mortgage) only increases the total cost of ownership.”

2. How long do you expect to stay in the house?

“It can be difficult to break even on a house if you stay in it for three years or less; the closing costs and commissions are significant, and expecting the house to appreciate in value enough within three years to make up for those costs may be setting your expectations too high,” Figgatt said. “And remember that your entire mortgage payment does not go towards the home’s equity. During the first year of your mortgage, depending on the terms, perhaps only about 30% of the payments will actually go towards the principal of the home.”

3. Why are you looking to buy?

“If you’re looking at the purchase as an investment, it could work out very well, but high fixed costs mean the shorter the amount of time you hold the property for, the less likely you are to come out ahead relative to other investment opportunities out there,” he said. “Constantly buying and selling houses if you move frequently may be eating up wealth, not increasing it. And if you plan to rent the place out after you move, make sure you have a plan for managing the property – be ready to pay for that, too.”

Additional Resources for Deciding to Buy a Home

Big financial decisions can be scary, and you don’t want to be paralyzed into inaction. InCharge Debt Solutions can help you think through the variables so you can decide if this is a smart decision right now.

If credit issues stand in your way, InCharge can help you become a better candidate for a mortgage and save money on your payments. Take the first step by looking into getting credit card debt relief to free up your finances for a home purchase.

A mortgage calculator can help sort through costs and budgets to figure out how much house you can afford. If you’re a renter, check out the rent or buy calculator for similar budgeting calculations.

Online homebuyer education courses can also be a stepping stone for those looking into homeownership. You’ll learn how to prepare for owning a home and get a better understanding of the home purchase process, including how to finance and afford a home for the long term.

Talk to a Professional About Reaching Your Financial Goals

For many people, owning a home is a cornerstone to a life-long financial puzzle. It’s a major life purchase because of the large amount of money needed for the investment.

But buying a house, as with buying a vehicle, investing in a 401(k), and putting money into a college fund, deserves thoughtful consideration before action. It also can require a clean bill of financial health, which requires minimal debt and solid credit.

If you have too much debt to qualify for a home purchase, consider talking to a qualified credit counselor about how to shrink your obligations to make homeownership a reality. A credit counselor can present options to get you to financial freedom — and into a new home.