Short-Term Savings, Long-Term Expense: The Benefits of Buying vs. Renting
According to the U.S. Census Bureau, 64.2% of Americans are homeowners. If you’re part of the 35.8% renting, you might think you’re saving money, and in the short term, you might be right. However, shifting your perspective to the long-term gains and benefits of owning may have you singing a different tune. Here are just a few ways owning a home is a better strategy over the long haul than renting.
Return On Investment
While making payments for your current living arrangements, you may be unable to save to buy a property of your own and get stuck in a cycle of renting. Plus, more frequent moves can mean additional security deposits and one-time fees—those can and will add up quickly.
On the flip side, a house that you own should be treated like an investment, adding value over time. Each mortgage payment translates to increased equity in the home, and equity can be a powerful tool for your financial future.
The money spent on rent is a valuable exchange for temporary living situations, but it’s not a long-term strategy for investment. In a way, home ownership is a built-in savings account that can help you accumulate wealth over time.
There are also considerable tax benefits to owning a home. Homeowners may deduct mortgage interest from their federal income taxes, as well as property taxes and qualified closing fees.
Another benefit of owning a home versus renting is that your base mortgage amount, which includes payment towards both the principal (your original loan amount) and interest, will not change month-to-month or even year-to-year if you opt for a fixed-rate loan. It is important to note, however, your monthly payments could fluctuate yearly due to other factors like property tax increases, insurance premium changes and hazard insurance. But ultimately, you’ll have more power over these decisions and costs than you ever will as a tenant.
Comparatively, rents are frequently adjusted to reflect market supply and demand or general economic conditions, based on the decisions of the property owner. A fixed payment amount spread over a long period of time—like the traditional options of 15 or 30 years—means that you will likely spend less over the life of the loan than you would renting for the same amount of time.
As an owner, unlike a renter, you’ll also have full transparency on when or if you decide to put the property on the open market. When renting, it can be jarring to have the home or property where you’ve put down roots sold to another individual or entity, meaning you may have short notice to move out and find a new place to live.
Freedom & Privacy
Though freedom and privacy might not be the biggest deciding factors for buying and renting, the ability to make decisions about your home (like interior decorating, painting, remodeling or landscaping) and privacy from landlords and neighbors in connected units are perks of being a homeowner rather than a tenant. You may also have fewer restrictions on owning pets, depending on your unique situation.
If you’re interested in learning more about how you might be able to break out of a cycle of renting with down payment assistance, contact Open Mortgage today.