9 Advantages of Buying a Home vs Renting
A lot of people have been paying rent their entire lives, but are willing to take the step in acquiring their own home. Homeownership has many benefits but there are important factors to take into consideration before making such a decision.
The Advantages of Buying vs Renting
In some instances, the thought of becoming a first time homeowner can be overwhelming. Homeownership can be a very rewarding thing financially as well as for your personal state of well being.
Here are 9 benefits of buying a home instead of renting:
1. The Payment of mortgage builds equity
We’ve probably heard that paying rent is a wasted expense that never supports our financial wellness. We pay rent to the home owner as an exchange for the use of their house or apartment. You do not have total control over the property. However, when you purchase a new home, your mortgage payment is put towards principal and interest in the form of a home mortgage. The principal paid on your home is the portion of the payment that directly reduces what you owe. Your equity is what is gained as the principle gets paid down and is considered an asset. Once you have paid your mortgage over the term of the loan, the property is 100% yours with full ownership. The interest, on the other hand, is the money that you pay for the financing of the home. Although these funds don’t get applied to paying down your mortgage, they are tax deductible and can substantially decrease your year end taxes.
2. Rents continue to rise
Rents have risen at an alarming rate across the entire country. The trend is expected to continue. According to research by the Urban Institute, rents in many markets have grown faster than median earnings. Rent is so high that monthly mortgage payments are often cheaper or on par with renting a house. You don't believe us? Check it out yourself. Zillow's Buy vs Rent Calculator will show you the number of years before buying costs equal renting - also known as the break-even point.
3. Homeownership makes a better investment over the long term
Renting a home means you'll be paying rent to your landlord, but nothing will come of it next month. Home ownership is an excellent investment, as it forces you to save. If you purchase a house with a mortgage for 30 years and pay monthly, you'll own the home at the end. Renting a house for 30 years will not allow you to get back any of the monthly payments.
4. Full Right To Make Any Improvement
In paying rent, any improvement on the home belongs to the owner. You only enjoy them while you continue to rent. But as the owner of your house, all the benefits of the improvements you make belong to you and can potentially increase your home's value.
5. You can pay as little as 0 dollars as a down payment
Sounds too good to be real? It's not. There are government programs and loan programs that allow qualified homebuyers to purchase a home for no money down. Keep in mind that closing costs are not included. The programs vary from lender to lender, and the borrower must meet certain criteria. If you want to buy a house with no down payment, consider a VA loan (for veterans, active military and military spouses) or a USDA loan.
6. Monthly payments that are predictable
Rent is rising and you're tired of it? Are you tired of your rent increasing? This will never happen when you own a house and use a fixed rate mortgage. The amount you pay each month and each year will always be the same. You won't be evicted by a landlord who wants to sell your home. You want to know what you can expect? Calculate your monthly mortgage payments for a new loan using our calculator. Enter the home price, down payment and loan term you want to calculate your estimated monthly payments.
7. You benefit when it comes to taxes
There are also tax benefits that come with buying a home as opposed to leasing a home. The benefits occur both at the point of your home purchase and also as time goes on. The first advantage comes the year you made the purchase; if a discount point is allocated to you on your loan, irrespective of who paid them, that is a deduction on your taxes. The discount points are prepaid interest which can reduce your total mortgage payment and are tax deductible. For each point you purchase, you have a reduction in your mortgage interest rate by 0.25%. In many instances the tax benefit of owning your own home is so substantial, that you can adjust the amount of taxes that your employer takes out from your paycheck and actually give yourself a raise!
8. Stable living Condition
There is also an unusual feeling of liberty and freedom when you buy your home. The home belongs to you. There is no fear of a lease expiration, or your leased property being sold. You can move within your premises as you like
9. Rent a room to earn extra money
Renting out a space is a great way to make extra money as a homeowner. You can rent your basement to a long-term resident or look for short-term tenants on Airbnb . You are the homeowner and you decide everything -- what you charge, when you rent out your home, etc. No roommate or landlord needs to be convinced.
The disadvantages of Purchasing a Home
However, we must not forget that owning a house is a big responsibility. Although there are not many disadvantages, to be fair we will list some
Repairs and Maintenance:
Unlike in renting, in which the homeowner takes responsibility for repairs and maintenance, if you own the home you are responsible for them. The thought of this could be discouraging. Therefore, it is recommended you create a small monthly savings to cater for such occurrences. One other commonly used option for taking care of unexpected home repairs and maintenance is obtaining a Home Warranty. A home warranty can be purchased in full upon the purchase of your new home and will cover many home repairs with a small deductible. In many instances, you may even get the seller to pay for your new home warranty for the first year.
Property taxes are your responsibility
You have the responsibility of handling the property taxes on your new home. You can calculate the amount you’ll pay in property taxes by taking your property’s assessment and multiplying it by the property tax rate, which is based on your jurisdiction or location. In many instances, your taxes can be included in your mortgage payment – that is called an Escrow Account. If your mortgage includes an escrow account, your mortgage company will pay your property taxes and in many instances your home insurance for you. One nice thing about property taxes is in most instances, they are fully tax deductible and can reduce your taxes at the end of the year.
Buying vs renting recap
Buying a home is surely a new responsibility. Home ownership can be a very profitable, sound investment and ultimately is the #1 way that people gain wealth. For assistance in purchasing a new home, you can start by searching for homes in Hood county. If you have any immediate questions you can contact a licensed real estate agent.
If you are relocating to Hood County, feel free to read our Relocation Guide.