We have all sorts of choices and paths to take on the complicated process of searching for a home. On your search, one of the first choices you have to make is deciding whether to buy or rent. Owning a home has always been a major milestone and objective
for a majority of Americans, hence “The American Dream”. More stability, adding to your net worth, and settling down with something that you own. Culturally, it’s always been that major step forward that people strive for.
Home ownership continues to have more benefits than renting today, but it’s more of a challenge too. Owning a home means more maintenance and responsibility. You also need to have a healthy financial situation where you can qualify for a mortgage in most
cases. That’s why some people simply prefer to rent without the extra responsibility and hassle. Let’s look at why buying a home is better than renting today along with the benefits of home ownership.
Why People Rent
Renting a home is always going to be a viable option for people. It’s flexible enough where you don’t have to commit to a living space long term. You can move annually without any penalties other than the general costs of moving around. Renters also don’t
simply give their money to their landlord for nothing. A rented home may not be an owned asset, but it’s a place to live.
The largest benefit of renting is that it makes your financial situation predictable. The monthly payment of your lease is the maximum amount of moneyyou’ll pay when you rent. When you own, your mortgage is the least amount of money you’ll be paying
each month. That means no stress over coming up with capital when repairs are needed. Additionally, you don’t have to pay property tax or spend time working on your rented space.
The Benefits of Owning a Home
Owning a home has the intangible benefits that you can’t get with renting. For instance, home ownership gives you a sense of stability and accomplishment. However, buying a home is technically better than renting too. Buying a home is more affordable
and is a much better long term option for your financial situation.
Buying a Home is Cheaper than Renting
You’ll have to save more money for a down payment and qualify for a mortgage by proving that you’re financially stable before buying a home. Yes, this is a challenge, and it’s more expensive up front. However, buying a home is cheaper in the long run
rather than renting.
At a 30 year fixed rate of 4.5%, buying is 38% cheaper than renting nationally (Trulia). The gap is so wide that Trulia reports the fact that, “Buying beats renting until interest mortgage rates hit 10.6%”. This report already factors in the extra costs
of owning a home including taxes and maintenance. Since rents continue to rise every year, the cost gap between buying and renting a home is significantly different.
While you pay what you owe on your purchased home, you’re still building equity every month. Your home is probably the most valuable asset that you have. You can pay your mortgage and add more value by making renovations. It’s not by any means a “get
rich quick” strategy”, but owning a home gives you that long term equity.
Equity could be converted into cash which helps you more with retirement, investments, and buying more property. Building your own equity sets up your future rather than having your money go into your landlord’s pocket every month. Since 2008, the value
of homeowner equity has skyrocketed more than 13 trillion dollars in the US. Value keeps rising for many homeowners, so it’s proving to be a good long-term investment still in 2021.
Even though paying taxes on your bought home is a challenge, you have tax breaks ahead. There are hundreds of deductions and credits available that you can look into. These breaks help reduce your tax bill. For instance, there are deductions available
when you pay mortgage interest, points, and even property tax. There are incentives to add energy-efficient renovations which you can also write-off when tax season comes around. Renters don’t have the benefit of tax reductions because they technically
don’t pay taxes on rent.
Just because you own a home doesn’t mean that you have to make it your primary residence forever. If you’re chipping away at your mortgage and have money to spare, you can buy other properties. You always have the option of renting out your home, especially
if you live in an attractive location. 77% of the people in the US prefer to rent instead of buying a home. This means that you always have a demand for renters who would love to take a look at your owned home. By renting out your house, you can have
tenants offset your mortgage while you focus on buying other properties instead.
Embrace the Opportunity to Buy
Buying a home may sound intimidating for many people out there searching for a home. While renting has a few benefits with low-commitment and flexibility, it will cost you more in the long run. Buying rather than renting is more affordable and builds
up your equity. You also create investment opportunities and can save with tax benefits that you can’t get with renting. Besides these technical advantages of buying a home, you get the intangible benefits too. Buying a home provides stability and it’s
a huge accomplishment. As long as your financial situation remains healthy, you won’t have to worry about evictions or raising rent prices. The home is yours until you decide to sell!