Looking to upgrade? Moving across the country for that cool job? Moving always begs the question, ‘Should I buy or rent a place?’. There are valid reasons for each choice. But in the long run, which is better?
When you rent a home, the landlord owns the property. You must abide by their rules, or you risk eviction. Often, that means little freedom to make the place truly feel like home. You can’t remodel the kitchen or completely redo the landscaping. You may be allowed to paint. But you must restore it to its original condition upon move out.
When you buy your home, you don’t have to answer to anyone. You can remodel the kitchen. Repaint the walls. Landscape however you would like. If these modifications are done properly, they will increase your home’s value. You reap the benefits of your hard work, not the landlord.
You do two vital things when you pay your mortgage each month. You pay your loan and grow your equity. As a homeowner, you get the added benefit of more equity each time you pay that loan.
Renters do not see that benefit. Each time they pay rent they don’t receive anything back. They are not the owner. It is a bill to pay if they want a roof over their head.
3. Tax breaks:
You don’t get a tax break for paying your rent. You don’t own the home, so there’s nothing to deduct. Rent is a due you owe and nothing more.
But when you own a home, that changes. When you file your taxes, you can deduct mortgage and interest payments each year. The tax breaks make homeownership far more affordable. Sometimes, more affordable than renting.
4. Rent prices fluctuate:
Your rent may increase between 3%-8% every year. It depends on your neighborhood. Eventually, you may find yourself priced out of your rental. You must move because the rent is higher than you can afford.
This is not the case with homeownership. Especially if you have a fixed-rate mortgage. As the neighborhood grows and develops, your property appreciates. You don’t have to do anything on your end to make this happen. When you sell, that’s money right back into your pocket. Not a landlord’s bank account.
One aspect of homeownership that does fluctuate is property taxes. As your neighborhood goes up in value, so do your property taxes. But this increased cost is tax-deductible. Renters cannot write off rent raises.
5. Growing wealth:
Homeownership and growing your wealth go hand-in-hand. Statistics show that the typical homeowner has over $200,000 in wealth. The average renter only has around $5,000 in wealth. This is not always the case, though. Many lost their homes when the market crashed during the great recession. Many were upside down on their mortgages. The home was costing them money, not growing their wealth. However, many who bought their home before the recession continue to reap the benefits today.
6. Better than stocks and bonds:
Investing in the stock market is a great way to grow wealth. It should be a tool you use. But homeownership is more effective at growing wealth. As your home appreciates, you earn appreciation for the home’s total value.
If your stocks appreciate, you only receive the gains on top of the investment. If you choose to sell, you would owe taxes on the money gained.
If your home appreciates at a steady rate and you sell, you don’t have to pay taxes on the gains.
There are so many benefits to homeownership. Once you are ready to settle down somewhere long-term, there is no reason to rent anymore. This is your opportunity to grow your wealth, not your landlord’s wealth! Visit us online to learn more information, or to start the pre-qualification process click here.