If you’ve been renting, you may wonder whether it makes sense to buy a home. You may have heard that inventories are tight right now or that the home-buying process is challenging. Maybe you have questions over the financial side of buying a home—and whether it’s better to rent or buy.
If you’re still trying to figure out whether it’s better to rent or to buy, here are seven reasons you may want to give up life as a tenant.
Historically, real estate has been known for its long-term, stable growth in value. You can expect that your home’s value will increase over the years, as opposed to purchases like an automobile, which typically decreases almost the moment it is purchased and continues to do so. With real estate, it’s reasonable to expect your investment to grow in value.
2. Building equity
You’ve probably heard that paying rent is just throwing your money away. That’s because there’s truth to that warning. On the other hand, paying down on your mortgage buys you a bigger piece of your home’s worth, growing over time. No more throwing money away.
As you make your mortgage payment, you will build equity in your home. It is like a forced savings account that you don’t realize until you sell. When you do sell, you can expect to take up to $500,000 for a married couple ($250,000 if single) as gain without owing federal income tax.
Unlike rent, your mortgage payment won’t rise over the years, as long as you have a fixed-rate mortgage. Your payment may decline the longer you own the home. This does not hold true for property taxes or insurance, however. Both will likely increase over time.
5. Social benefits
There is a social factor as well to home ownership. Living in the same neighborhood will help you and your family establish lasting ties and relationships. You’ll also enjoy the psychological benefits stemming from “pride of ownership.”
6. Tax advantages
Perhaps one of the most well-known benefits of home ownership is that the U.S. Tax Code allows you to deduct the interest you pay on your mortgage and your property taxes. You may even deduct a portion of the costs involved in buying a home.
How you decorate the interior of your home, your landscaping, and everything about it is now up to you. No asking for permission. Keep in mind, some HOAs may still have a say in what you do with your home.
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