Have you been considering purchasing a home? A home is the largest purchase a person is likely to ever make in their life, so before you spring forward into this investment, it’s important to consider whether it’s the right financial and logistical move at this stage of your life.
What are the benefits of renting vs. buying a house—and vice versa?
Here’s a quick look at the pros and cons of each to help you answer the question, “Should I rent or buy a house?”
Let’s start with the advantages of buying a home.
First, there’s the financial benefit. A home purchase is typically a good investment. Houses generally increase in value over time. You will also stabilize your housing costs year over year. By locking into a mortgage, you won’t have to worry about costs going up like you would with rent. With how fast rent costs tend to escalate, this is a big deal.
Most importantly: You get to build equity in a home that is all yours. With rentals, your money just goes into the pocket of a landlord. With homeownership, you get closer to fully owning the property and build equity with every payment you make.
There are tax incentives associated with homeownership. You’ll be able to write off various improvements, and, if you work from home, you can benefit from home office deductions. You can also deduct mortgage points and other costs associated with homeownership.
Other benefits to consider include the greater privacy associated with homeownership, the ability to do whatever you want with home improvements and the pride that comes with owning a home and having strong community ties.
There are, of course, drawbacks to consider.
Homeownership is a long-term commitment, which may not be for everyone. This long-term commitment means a lack of flexibility with your living situation.
The high, up-front costs, as well as the costs of ongoing maintenance and repairs, may scare you off before you get the long-term benefits of building equity. It’s often more expensive than renting, and you run the risk of foreclosure if you can’t make your payments.
There are several main benefits of renting to consider.
First, the costs tend to be lower. When you consider the costs of a mortgage plus property tax, homeownership is usually going to be more expensive—at least until you’ve paid off the mortgage, which will likely take decades. There are also very minimal maintenance costs, as the landlord is in charge of taking on repairs.
There is a shorter-term commitment with rentals, which allows you to get out faster and move on a whim.
However, there are no tax incentives or equity associated with renting, and your housing costs will increase with inflation, which can make it difficult to budget over a longer period of time.
Want to further explore the benefits of renting vs. buying a home with an expert? Contact us at Valley Executives Real Estate & Property Management LLC with any questions you have for us.