Are you thinking about buying a home? While renting offers certain advantages (such as mobility, and reduced costs for home repair), owning a home also comes with several benefits. Let’s discuss the difference between renting and owning, why you may want to own your own home, and the key benefits of homeownership.
What’s the Difference Between Renting and Owning?
When you rent a home, you’re not the owner, which means you’re not the one primarily responsible for property maintenance and repairs. That’s a good thing (usually). You also have a lot more freedom in terms of moving whenever and wherever you want. On the other hand, it’s almost inevitable your rent will increase each year — which isn’t so good. Even more concerning, your landlord may sell the property, or leave it to relatives upon death, and the new owners may decide to turn you out. Of course, when you own a house, it’s all yours — the benefits and the responsibilities alike. You’ll have to keep up with home maintenance, pay property taxes, and typically live in the same residence until you sell it (which may take a while). Bottom line? Renting and owning are two completely different ball games.
Why Would You Decide to Buy a Home?
There may be a number of reasons why you decide it’s time to join the ranks of homeowners. Here are a few of the most common ones:
- Your family is expanding. If you have a new child on the way, or an elderly relative needs to move in, then you may need more living space. Sometimes, buying a home is the only viable option to get the space you need.
- Housing prices are within your budget. One recent study found that housing ownership is 38% less expensive on average than renting. From a purely financial perspective, it may make sense to invest in homeownership rather than deal with rising rental costs.
- You want to invest in the future. You may want to “put roots down” in one place, and build your wealth at the same time. If so, then buying a home makes the most sense for you.
What Are the Benefits of Owning a Home?
It wouldn’t be possible to list all of the potential benefits that come with owning a home in one article. That being said, here are 3 big ones to consider:
1. Homeowners Get Major Tax Breaks.
If you’re a homeowner, then you’ll be able to take several tax deductions on your yearly return. These deductions may include:
- Mortgage interest
- Property taxes
- Mortgage insurance
- Profit received from a home sale
Sure, itemizing your deductions as a homeowner may take some time and effort. However, you could earn hundreds, even thousands of dollars in tax savings if you do!
2. Homeownership Builds Equity
Equity is basically the cash value of your home that belongs to you. In other words, the difference between the total value of your home and what you still owe on your home loan. Equity is something only homeownership can build since renters don’t own the property on which they live. As your equity grows, you’ll be able to borrow against it in the future, either for home improvements or other financial needs. Think of it as a way to really raise your line of credit.
3. Homeowners Enjoy More Stable Expenses
With homeownership, you won’t have to worry about your rent going up again next month. Instead, you’ll be able to enjoy a fixed monthly payment for many years — which is a great help when it comes to developing a workable budget.
Since this is National Homeownership Month, now is a great time to educate yourself on the pros and cons of buying your own place. You can explore this rent vs. buy calculator from NerdWallet as a starting point!