Buying a home is one of the best investments you can make. Even if you don’t have a large
down payment or perfect credit, there are ways to get approved for a mortgage and become a
homeowner.
Unfortunately, many assume a mortgage is more expensive than rent and avoid buying a home.
However, looking at the big picture, it’s the other way around – buying is always better than
renting.
If you’re considering the difference between buying and renting, here are eight reasons to
consider buying a home.
You’ll Build Equity
When you rent a home, you don’t have anything to show for it. You pay rent and then leave the
home when the lease ends. You don’t leave with any money in your hands and must find
another home to lease. In the meantime, the landlord earns the equity and enjoys the profits
when he/she sells the home.
When you buy a home, you build equity in the home. Equity is the difference between the
home’s value and your outstanding mortgage. It’s the money you’d receive in hand if you sold
the home today. So the more you pay toward your mortgage, the more equity you’ll have.
Your equity will also increase naturally with home appreciation. Homes appreciate an average of
3% – 4% per year, which is like getting a 3% – 4% annual return on your investment. Couple this
with the increased equity earned from paying down your mortgage, and you have a nice
investment for your future.
Depending on how much equity you have, you may be able to use it for other purposes, including:
- Debt consolidation
- Investing
- Home renovations
- Paying for college
You can do What you Want with the Home
When you rent, you can’t make any changes to the home. Sometimes you even have to ask to
paint the walls or hang pictures. Because you don’t own the house, you must ask permission
from the owner before making any changes.
When you own the house, you can do what you want with it. So, for example, you’d only have to
ask permission if you’re doing any major remodeling, which might require permits from the city
or county.
You Don’t Have to Depend on Anyone Else for Repairs
Landlords are responsible for a home’s upkeep and maintenance. So when something goes
wrong, you’re at the mercy of the landlord to fix the issue. Unfortunately, this may not happen
as quickly as you like, which can be inconvenient and frustrating.
If you are the homeowner, you control when and how repairs happen. You can call whoever you
want to repair the issue, and you don’t have to wait for a landlord to make decisions.
You may be Eligible for Certain Tax Deductions
When you rent, you pay the landlord and don’t get any tax deductions. The landlord, however,
may get tax benefits from owning the home.
Rather than paying someone else’s mortgage and letting them get tax benefits, you can be the
owner and get the tax deductions. Of course, not everyone qualifies for tax deductions,
especially if your itemized deductions aren’t more than the standard deduction, but it’s always
worth talking to your tax advisor to see.
You can Use the Equity to Buy More Homes
When you build equity in your home, you can leverage the equity, investing it in even more
homes. Being able to invest the money into another home is a great way to increase your net
worth, and if you rent the property out, you’ll also earn monthly passive income.
Equity from their primary home is how most investors start real estate investing. You may not
even need a lot of your own cash, as everything can come from the home’s equity.
You’ll Reduce your Living Expenses Eventually
When you rent, it never ends. As long as you live in the home, you must pay rent, even if the
landlord doesn’t have a mortgage any longer.
If you own the home, your living expenses will eventually decrease because you will pay the
mortgage in full. This means your own housing expenses will be your taxes, insurance, and
regular utility costs.
You Don’t Have to Worry about Rent Increasing or Losing your House
Landlords have the right to increase rent prices when you renew your lease. So even if you
move each year and sign a new lease, overall rents increase year-to-year to cover the higher
cost of living.
There’s also the risk that landlords will decide they no longer want the house and will sell it. This
means you’ll have to find a new place to live, sometimes unexpectedly.
When you own your house, you are in charge of when you move. You don’t have to worry about
increasing rent prices or someone selling your house from underneath you. Mortgage payments
don’t change unless you have an adjustable-rate loan, which then your interest charges may
change each year.
You can Set up Roots
There’s a different feeling when you buy a home versus rent. When you rent, you don’t feel like
a part of the community. You’re constantly on the move and can’t establish yourself in a
community. Your children may have to move schools, and you may have to move churches and
other community services you use regularly.
When you own a home, you set up roots and become invested in the community. You build
relationships, join groups, and feel like you’re a part of something bigger than yourself.
Final Thoughts
Buying is always better than renting, even if it seems more costly upfront with closing costs and
down payments. The equity you build in the home and the freedom owning a home provides
makes buying a home much better.
Even if you’ve never owned a home, loan programs are available for first-time buyers. You don’t
need as much money down as you likely think, and the terms are favorable, making buying a
much better decision than renting.
