Renting can seem like the easier and more affordable option in the short term, but many people overlook the potential benefits of buying a home instead of continuing to rent. The question of whether it’s better to buy or rent comes down to your situation and how you view your financial future and your investments. To help you make an informed decision, here are the top reasons why buying instead of renting is better than renting one, despite the mortgage payments that come with it.
It’s yours to Do What You Want With
When you buy a home, it’s yours to do with as you please. You can paint it any color you want, personalize it however you choose and build additions if needed. No landlord is going to tell you that your addition—one he never paid for—is ugly or distracts from his view. As for your interest in decorating, sure, your landlord might be all right with letting your place be red for Halloween, but maybe not if pink stays around too long after Valentine’s Day. When you own a home, no one will care what colors are inside or what shape your shed is if they don’t live there!
It’s an Investment
If you buy a home, you can deduct mortgage interest from your taxable income. That means if you make $50,000 and have a $3,000 mortgage payment, only $47,000 of your income is taxed. That difference could be substantial in some cities or states with higher income taxes (California and New York City come to mind). Purchasing also allows you to avoid paying rent in two places: your landlord’s place and your own.
Owning a home is one of the best ways to ensure your money will work for you. You have a better financial future if you own your place instead of renting. That’s because most homeowners see their wealth accumulate over time due to appreciation in home values, lower taxes, and extra cash flow from tax deductions for mortgage interest payments and property taxes. And if they need to move, they’ll usually sell their home for more than they paid—getting some or all of their original investment back. All that—plus keeping any money you’ve invested in improvements or renovations—makes buying your place more advantageous than paying someone else’s mortgage.
When you buy, your housing expense is fixed. No matter what happens with interest rates or maintenance costs, you know how much you will pay every month. When you rent, your expenses are variable. Rents can go up or down, but no one ever guarantees that they won’t go up for as long as you stay in that apartment. And some landlords are becoming more predatory about making sure they get their money out of tenants every month by raising rents to market rate once they know they have a tenant locked in.
Lending institutions view tenants as a high risk, which is why they may have difficulty approving certain types of loans, such as mortgage refinancing. Tenants also tend to have no financial history because most lease agreements do not require payment by check. Owning your own home is one way to build and improve your credit history and makes it easier to get approved for loans in the future, such as auto financing or business investment.