A common question for adults who are starting to set out on their own is an important financial one: What is better for me when it comes to renting vs buying a home? Everyone, of course, may find themselves in a different financial situation or housing market. However, generally speaking, there’s no question about it: When it comes to renting vs buying a home, buying is preferable to renting. Here are five reasons why it is better to buy vs rent.
In The Long Run, Buying is Cheaper Than Renting
In most places, save for the most expensive of housing markets, when it comes to renting vs buying a home, buying is cheaper than renting over the long-run. This is because buying a home allows you to lock in a mortgage payment, something that usually isn’t possible when you rent. Given the current decline of mortgage rates, it is even cheaper to buy a home.
Remember, your actual mortgage payment will never increase. Generally speaking, unless you live in a rent-controlled facility, your rent will increase. On a year-over-year basis, these rental increases will likely outpace any increase in your homeowner’s insurance or property taxes.
Build Equity, Rather Than Building Your Landlord’s Equity
When you make mortgage payments, you’re building equity in your home. Equity is essentially the money that you pay into your home. You can then borrow against that equity if you need it, and the rates that are more reasonable than you would if you made a credit card payment. Building equity essentially allows you to access the payments that you make on your home.
When you rent, you build no equity. Instead, you are turning your rent check over to your landlord. They can then do whatever they want with that money, including building their own equity on their property. As such, you have to ask yourself: Would you rather build your own equity or build the equity of your landlord?
Improve Your Credit Score
Your credit score is a vitally important metric that will have an impact on your ability to do a variety of financial things, including obtain loans and credit cards, as well as lower your interest payment. Homeownership can be very beneficial for your credit score, provided you make your payments. This is because obtaining a mortgage can accomplish a variety of positive items for your credit, including establish a credit and payment history and show that you are capable of making regular payments on expensive items. This, in turn, will increase your credit score, and usually do so faster than renting would accomplish.
Save Money on Taxes
Homeownership comes with a variety of tax benefits that can save you tens of thousands of dollars over the years. You can deduct many of the common expenses associated with homeownership, including mortgage interest, property tax paid and private mortgage insurance premiums. This, in turn, can save you thousands of dollars a year – money that you can then reinvest in any number of ways.
Gain Control Over Your Property
When you rent, you are at the mercy of someone else’s decisions. Yes, you may be able to put up a picture here or a bookcase there, but renting means that someone else ultimately can do whatever they want to the place in which you are living. Buying means you have the power. Want to renovate? Paint a room? Turn that dingy basement into a man cave? Go for it. It’s your home and your decision. When you rent, you do not have that power, and your landlord can do whatever they want to their property – even if you are living in it.
This isn’t to say that the decision to buy vs rent is easy, or doesn’t come with challenges. However, these challenges are usually well worth enduring. Owning a home is absolutely preferable to renting, and when it comes to the decision to buy vs rent, the choice is clear.