Mortgage vs rent, an old tale. It’s one of the great debates in the financial world. But it’s also not just about what you can afford with your income or savings, but also which option is better for building equity. As your home builds equity, it begins to work as an asset by generating equity gains that you can use on mortgages or rent payments. We’ll look at the options and give you a general idea of what to expect when deciding between buying and renting.

Cost to build vs buy

The cost of building a house is often higher than the cost of buying one. However, there are several factors that can affect the costs and it’s important to consider them all before deciding whether to build or buy.

Buying a new home is usually cheaper than building one. This is because the price of land and materials can be high, as well as the cost of labour if you’re doing the work yourself.

It’s also possible to find deals on pre-fabricated homes that are much cheaper than those built from scratch. This can make buying an attractive option, especially if you want to move quickly or if your budget is restricted.

However, many people prefer having the freedom to choose their own design and materials rather than being restricted by stock designs in showrooms or catalogue stores. They may also want to keep costs down by doing some or all of the work themselves rather than paying tradespeople for every task they need undertaken.

Buying a home can be an expensive proposition. In some areas, the average cost of a home is more than $300,000, according to the National Association of Realtors.

The average new home costs about $350 per square foot to build. If you’re looking for a fixer-upper or older home that needs repairs, it may cost less per square foot. But if you’re looking for a brand new house with all the bells and whistles, expect to pay up to $500 per square foot in high-end neighborhoods like mine in San Francisco.

For perspective, let’s say you want a 2,000-square-foot house with three bedrooms and two baths. That would cost about $450 per square foot in my area — or roughly $900,000 before any upgrades or additions. You could find some cheaper homes if you looked hard enough but they’d probably need work or wouldn’t be in your preferred neighborhood.

Compare that figure with what it costs to build a new home:

According to the National Association of Home Builders (NAHB), it takes about $267,000 on average for a builder to construct an 800-square-foot home from scratch (not including land costs).