To buy or rent, that is the question. Learn which option is better for you and your situation.

Owning a home is a life goal for a lot of people, but in reality, home ownership isn’t always the best option for every person or situation. In some scenarios, renting is a better option than buying a home. If you're weighing the rent vs. buy decision, take these factors into consideration:

1. Do you have access to a lump sum of money for a down payment?

A down payment is usually (but not always) required when obtaining a home loan. The amount of the down payment depends on the type of mortgage you obtain. It is commonly 20 percent of the home price, but there are several low and no down payment mortgage options available.

Your down payment can come from any source, including a savings or investment account. You might also be able to obtain money for a down payment from a family member. Keep in mind that as part of the mortgage loan application process, you will probably have to demonstrate you have enough funds to cover the down payment.

2. How would a home loan affect your monthly cash flow?

To answer this question, determine how a monthly mortgage payment would compare to a monthly rent payment (use the Cadence mortgage calculator to estimate a monthly mortgage payment). Some people assume that a mortgage payment will be higher than a rent payment, but this isn’t always the case.

With home prices still below their pre-recession peak in some areas of the country and mortgage rates still near historic lows, paying a mortgage could actually be cheaper than paying rent. Remember to include real estate taxes and homeowner’s insurance in your monthly mortgage expense, since these costs are usually added to the mortgage payment.

3. Can you realize tax benefits from home ownership?

Owning a home may offer significant tax benefits. Specifically, you may be able to deduct the interest you pay on your mortgage and your real estate taxes on your federal income tax return.

To do so, you must itemize deductions and include Schedule A along with Form 1040 when filing your return. If you claim the standard deduction — which is $12,950 for singles and $25,900 for married couples filing jointly in 2022 — you cannot deduct mortgage interest and real estate taxes. Consult a tax adviser for more information on the tax benefits of homeownership.

4. What's your lifestyle like?

The rent vs. buy decision goes beyond financial considerations. There are also lifestyle implications at play.

For example, when you rent, you can just call your landlord when the air conditioner or water heater breaks. As a homeowner, though, it’s up to you to fix these things yourself. If you’re a DIYer, you might enjoy these kinds of projects — but if you aren’t, you’ll have to pay for repairs.

Depending on the type of home you rent, the same concept might apply to landscaping and yard work. When you own or even rent a home, these projects are up to you, but apartment complexes and other multifamily housing units often handle landscaping themselves. If you're not big on home and yard work, you might not enjoy home ownership.

There's a certain pride in home ownership, however, and it tends to give you greater ties to the community. You also have more control over your living space; when you rent, you can't just knock out a wall or paint everything a different color if you feel like it. Owning a home makes it uniquely yours, which is a degree of freedom that doesn't come with renting.

5. How solid is your credit?

In analyzing your mortgage loan application, your lender will carefully examine your personal credit. So it would be wise to order a copy of your credit report before you apply for a mortgage to see how strong your credit is. You can also take steps to improve your credit score.

One of the factors affecting your credit score is how much consumer debt you currently carry. Lenders want to make sure that your current debt load and other financial obligations won’t preclude you from making your monthly mortgage payments on time.

Another major factor in your credit score is whether or not you pay your bills on time. Even one late payment can have a negative impact on your credit report, so strive to make timely bill payments.

6. How long do you plan to stay in your home?

If you plan to put down roots and stay in the home for many years, you might benefit from buying a home instead of renting. Over time, you may build equity in the home, since a portion of each month’s mortgage payment goes toward paying down your loan principal.

However, if you have a short-term time horizon for a home, you might be better off renting. This will give you more flexibility to move if you want or need to, since you are bound only by the length of your rent term (such as one year).

Choose your mortgage lender carefully

If you decide to buy a home, take great care in choosing your mortgage lender. A home is likely the biggest financial commitment you will ever make, so you need to be comfortable working with your mortgage lender. The process can take 30 to 90 days.

Don't hesitate to contact Cadence Bank for more information about obtaining a home mortgage.

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.