When it comes to homeownership, there are many benefits to owning your own home. However, many first-time homebuyers believe that renting is the better financial play. While it is a huge investment, there are many benefits of buying vs renting a home: here is what you need to know.
Benefits of Buying vs Renting a Home
Over the course of many years, owning your home is much wiser than renting an apartment or home. However, one factor to consider when considering homeownership is the length of time in which you want to stay in the area. If you have established roots, then the more logical it is to buy a home. Here are some more pros to owning a home:
One of the first steps in purchasing a home is pre-approval for a mortgage. Depending on your financial history, credit score, and other factors, you may be approved for a fixed-rate mortgage loan. A fixed-rate mortgage means that you will know the exact amount of your principal and interest payments for the life of the loan, which could last as long as 30 years. Mortgages are much more consistent than rent payments because with rent the landlord may increase rent depending on the market.
Equity and Investment Opportunity
While homes come with a much larger price tag, homeownership is the equivalent of a forced savings account. You pay your mortgage lender each month, but the money comes back to you in the form of equity since the home’s market value increases over time, especially if you live in an area with a strong market. So, while you may be looking to purchase your dream home out of the gate, it may be smart to buy a starter home to begin building equity and opportunity for future investment.
Stability and Community
With homeownership comes community, the ability to finally put roots down and connect with neighbors and individuals in the area. Owning a home creates a more stable household because the financial stress with varying payments is reduced and the is no longer need to pack up your belongings at the end of the lease term.
Seller’s Tax Break
Mortgage interest and property taxes are no longer tax-deductible, but there are benefits once you sell. As of 2017, homeowners no longer have to pay capital gains on the profit received after selling their home, up to $250,000 for single taxpayers and $500,000 for married filers.
Disadvantages of Renting
In today’s housing market, the cost of rent has shown to increase at an exponential rate throughout the country. According to research from the Urban Institute, rent in many markets has grown even faster than median incomes. This means that monthly mortgage payments can be cheaper than renting while providing opportunities for investment.
Renting is best for temporary living, but for individuals looking for long-term solutions, renting is unstable. Depending on the property owner, they may be able to remove you from the unit with a 30-day notice and kick you to the curb if they decide to sell the property. Owning a home means that you will no longer be at someone else’s discretion unless the mortgage defaults due to missed payments.
One major disadvantage of renting is the lack of personal renovations or decorative changes to the unit. So, while you can hang artwork, you cannot change paint colors, cabinets, or countertops. Purchasing a home allows you to customize the look of your space without rules and regulations from a property owner. Some apartment complexes also have regulations on the type of pets that can live with you. From the breed of dog to exotic animals, the regulations can be difficult to workaround.
Renting vs Buying: The Choice is Yours
When it comes down to the benefits of buying vs renting, the decision between the two depends on your financial situation and the responsibilities you wish to have with your home. Homeownership is an incredible investment to have in your portfolio, whereas renting leads to lost finances month over month. If you are still debating on whether homeownership is the path for you, contact Millennial Title today to discuss which option makes more sense.