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5 Major Reasons Why You Should Buy a Home Instead of Rent

Personal Finance

5 Major Reasons Why You Should Buy a Home Instead of Rent

There are times when it is better for a person to rent, but most often, home ownership has many more benefits and advantages.

About 10 years ago, my retired aunt and uncle rented a condo in Las Vegas. Uncle Jim (not his real name) was a retired minister. Throughout his career, he and his wife lived in parsonages, which are homes furnished by a congregation while they ministered there.

He and his wife told me the biggest mistake they ever made was not investing in buying a home. In their retirement years, when their other retired friends were living in homes that were almost paid off and had appreciated greatly, Uncle Jim and his wife were using a huge portion of their limited retirement money to make expensive condo rent payments. They strongly cautioned me not to make the same mistake.

Recent studies show that there are many benefits for both the owners and the community for owning your own home, including increased education for children, lower teenage pregnancy rate and a higher lifetime annual income for children. Besides these, listed below are some of the primary advantages for owning your own house.

1) More Stable Housing Costs

Rent payments can be unpredictable and typically rise each year, but most mortgage payments remain unchanged for the entire loan period. If the taxes go up, the increase is usually gradual. This stable housing cost is especially important in times of inflation, when renters lose money and owners make money.

2) Tax Savings

Homeowners can be eligible for significant tax savings because you can deduct mortgage interest and property taxes from your federal income tax, as well as many states’ income taxes. This can be a considerable amount of money at first, because the first few years of mortgage payments is made up mostly of interest and taxes.

3) Debt Consolidation

If you need to, you can refinance a mortgage loan to consolidate other debts (an opportunity you don’t have if you are renting.) And the interest on this is also tax deductible.

4) Equity

Instead of payments disappearing into someone else’s pocket, homeowners build equity in their own home. This is often one of a person’s biggest investment assets. Each year that you own the home, you pay more toward the principal, which is money you will get back when the home sells. It is like having a scheduled savings account that grows faster the longer you have it. If the property appreciates, and generally it does, it is like money in your pocket. And you are the one who gets to take advantage of that, not the landlord. You can then use this equity to plan for future goals like your child’s education or your retirement.

5) It Is Yours!

When you own a home, you are in control. You have the freedom to decorate it and landscape it any way you wish. You can have a pet or two. No one can pop in and inspect your home and threaten to evict you.

Even young people, like college students out on their own, can often benefit from home ownership. It puts them ahead of other young people their age financially by helping with their credit and giving them what is often an excellent investment. Often a college student buying a home will rent the rooms out, and his or her roommates end up making the payments for the house. When the student is ready to move on, her or she can sell the home (hopefully making a profit) or keep it as an investment and continue to rent it.

Buying a home is an important decision. It is often the largest purchase a person makes in his or her life. Home ownership also comes with some increased responsibilities, and it isn’t for everyone. There are some disadvantages to homeownership that you should take into account.

1) Increased Expenses

Your monthly expenses may increase, depending on your situation. Even if the monthly payments are the same, homeowners still must pay property taxes, all the utilities, and all the maintenance and upkeep costs for the home. Often you need to supply appliances that were furnished with a rental.

2) Decreased Freedom of Mobility

Homeowners can’t move as easily as a renter who just has to give notice to the landlord. Selling a house can be a complex and time-consuming process.

3) Risk of Depreciation

In some areas with overinflated prices, there may be a risk that the house will depreciate instead of increase in value, if the prices go down. If you then sell the house, you may not get enough money from the home to pay back your mortgage, and you will still owe the mortgage company money.

4) Possibility of Foreclosure

If for some reason you are unable to make your payments, you risk having the lender foreclose on your property. This can result in the loss of your home, any equity you have earned, and the loss of your good credit rating.

When considering home ownership, you need to weigh the advantages and disadvantages for yourself. If you are like most people, you will find that homeownership is worth the risk.

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