Renting Versus Buying a Vacation Home: How Do You Decide?

You’ve come home from a dream vacation and already want to go back. Maybe you fell in love with the sights, the community or the idyll, but visions of a home away from home are filling your head. What if you had a place of your own in that perfect vacation spot?

Before you pull the trigger and put in an offer, you should take a step back and ask yourself: “Should I buy, or should I rent?”

With home prices and mortgage rates across the country still high and average rents rising faster year over year post-pandemic, this question is more nuanced than ever.

Here are four financial questions to consider as you navigate this complex (and pricey) housing market:

1. What’s my time frame? The longer you plan to hold on to the home or vacation destination, the more financial sense it makes to buy. If you don’t see yourself keeping a house for at least three to five years, it likely won’t appreciate enough to justify the transaction costs of buying and selling. In this case, renting may make more sense.
2. What’s the true cost of ownership—and can I afford it? You have to build more than just the principal and interest payments on your mortgage into your budget; there are also property taxes, utilities and insurance. And plan to spend 1% of the home’s total value annually on maintenance.

   The question becomes: “Can I afford to buy?” A simple rule of thumb is to add up the monthly principal, interest, taxes and insurance payments, then divide by your monthly gross (pretax) income. If your total housing costs are greater than 28% of your income, you may be stretched too thin—renting (or buying a less expensive home) is the safer call.

3. Will I save on taxes? A mortgage interest deduction is often touted as a reason to buy. But keep in mind: Before tax laws changed in late 2017, homeowners could deduct interest on mortgages worth up to $1,000,000. Now that’s down to $750,000 (and this change is permanent as of 2025). What’s more, you must itemize your taxes to take advantage of any mortgage interest deductions. Because of those same tax-law changes, many owners don’t see any benefit to itemizing because of the increase in the standard deduction (in 2025, it’s $15,750 for single filers and $31,000 for spouses filing jointly).
4. What are my opportunity costs? This question is one you may not think to ask yourself, but it’s how financial planners analyze decisions like these: If you invest your down payment in the stock market instead of using it to buy a house, what rate of return could you reasonably expect? Or what if you simply deposit that money in the highest-yielding savings account you can find?

   Likewise, if you could rent a similar property for less per month than your total monthly costs of ownership, how much would you gain by investing the excess savings every month? It pays to do your homework and look at homeownership through an investment lens.

Of course, the rent or buy question goes beyond just the financials. Some people value the flexibility that comes with renting. Others feel more connected to their community when they own their home. We’ve focused on the financial side of renting versus buying, but don’t discount the emotional aspects of this decision.

If you have any questions about what’s best in your specific situation, please contact your advisory team. We are happy to help you work through the numbers and other considerations.