Deciding whether or not you should buy or rent a house is no easy task.
With pros and cons of both, you must be patient and only take action when you’re 100 percent confident in your decision.
While there’s nothing wrong with renting — and it’s the best choice for many people — buying a home is often the right move.
Today, we’ll dive into five reasons why it’s better to buy vs. rent.
1. A home is an investment
When you buy a home, you’re paying toward something that will one day be yours.
Even if it takes you 30 years to pay off your loan, every payment brings you closer to the end.
Conversely, when you rent, your payment goes to your landlord. They then use the money how they best see fit. You don’t get anything in return by way of equity.
If you’re going to spend money every month on housing, you might as well get something in return. And the best thing you can get is equity.
Tip: talk to your real estate agent about local areas that are the best long-term investment. If you plan on staying in your home for years to come, you want to purchase a property in an area with a history of appreciation (more on this below).
2. Potential tax benefits
It’s best to speak with a qualified tax professional before buying a home.
They can answer your questions and explain any tax benefits that you may qualify for as a homeowner. Some of the potential tax benefits include:
- Mortgage points deduction
- Mortgage insurance deduction
- Mortgage interest deduction
- Home office deduction
- Real estate tax deduction
You may find that you qualify for one or more of these tax breaks, which saves you money on your annual tax bill.
But as noted above, you should double-check with your tax professional. You don’t want to assume you’re eligible for a tax break just to find out differently.
3. Potential appreciation benefits
One of the primary benefits when you buy vs. rent a home is the potential for it to increase in value over time. While there’s no guarantee this will happen, history shows that real estate appreciation is commonplace.
According to the U.S. Census Bureau and U.S. Department of Housing and Urban Development, the median sales price of houses sold has steadily increased since 1963.
Some years are better (and worse) than others, but real estate is proven to appreciate over the course of time.
You don’t gain access to appreciation benefits when you rent. You make a monthly rent payment and your landlord benefits from appreciation.
In other words, you’re spending money to make your landlord money. You’re not doing anything to help your own financial situation.
4. Security
One of the biggest fears associated with renting is finding yourself without a place to live.
At any time, your landlord could decide that they need you to move out. For instance, if they’re selling the home, they may ask you to vacate the property.
When you own your home, there’s security in knowing that nobody can make you leave your home as long as you continue to make your mortgage payments. But when you rent, you’re always at the mercy of your landlord.
Financial security also comes into play. Below, we discuss how your mortgage payment can remain steady for the life of your loan. This allows you to pay the same monthly amount in 20 years that you are right now.
With renting, you’re once again at the mercy of your landlord. They’re likely to raise your rent now and again to keep up with the market and inflation. And unfortunately, they don’t have to check with you before doing so.
Once your lease is up, they can alter the payment and ask you to move out should you not agree to it.
5. Stable payments
If you opt for a fixed-rate mortgage, your payment will remain the same month after month, year after year. No matter what happens with inflation or the real estate market, your payment is stable.
When you rent, your payment is only stable for the term of your lease. For example, if you have a one-year lease, your landlord has the right to increase your rent at the end of the term. So, if you want to stay in the home, your only option is to pay this increased rate.
Stable payments are especially important for individuals nearing retirement age or those who are already retired. This makes it easier to budget on a fixed income.
Tip: based on your financial circumstances and goals, your mortgage lender can answer questions about the best type of mortgage for you.
Even more reasons why buying is better than renting
Along with the five reasons above to buy vs. rent, don’t forget the following:
- You have more privacy when you own your home
- You have the freedom to do what you want with your property
- Your payments eventually come to an end
- There’s more than one type of mortgage to choose from
These aren’t small, inconsequential benefits. They can have a big impact on your personal and financial lives.
What do you think—is it time to buy?
Now that you know why it makes sense to buy vs. rent, you can turn your attention to two details:
- Finding your dream home
- Securing a pre-approval for a mortgage
When the time comes to shop for a lender and loan, AAA Banking is the only stop you need to make.
Not only do we make it simple to secure a mortgage, but our team of experienced professionals is available to answer your questions and provide guidance every step of the way.
Get started by contacting us online or via phone at (844) 897-2265. Either way, we’re here to meet all your mortgage and refinancing needs.