If you’re not sure whether you should rent or buy a home, this is your ultimate guide to the 6 benefits of homeownership.
Owning a home versus renting a house is a dilemma that many people face. Renting a home seems like the safer option because you do not have to fork out a lot of money up-front for a down-payment. There is no need to worry about losing money on an unwise investment and you aren’t financially or otherwise responsible for repairs and damage to the home (unless you cause them due to recklessness). This sounds great, right? Wrong! You do not have any liability because you do not have any control or anything to gain.
When you rent a house, you aren’t able to make any changes or modifications to the home or property without first consulting your landlord. Even if your landlord gives you permission, you are now investing your own time and money into a place only to put money in someone else’s pocket. Let’s take a look at 6 reasons why owning your own home is better for you financially than renting a house.
1. Owning Your Home is an Investment in Your Future
When renting a home, you pay rent each month without the benefit of seeing a return. At the end of your lease, you will either move or renew your lease. It doesn’t matter if the property appreciates or the home is paid off while you are paying rent, you will not reap any of these rewards because you are merely paying the owner for the right to live in the rental home.
Owning a home is a long-term investment in your future. You will reap all of the benefits of any improvements to the home and the equity as you pay off the loan and the property appreciates. It is a home that you can pass on to younger generations if you wish. If you decide to sell the home in the future, use the profit to make a nice down payment on a new home. The possibilities are endless because your home is now an asset!
However, like any investment, you must choose wisely. It is important to purchase the right home at the right time. Buy at a low price point and make sure your home can appreciate over time.
2. Build Equity in Your Home
One of the best perks of purchasing a home is that over time it will build equity!
Equity is the percentage of your home that you own after deducting all debts. Let’s say for instance your home’s market value is 350,000 dollars and the balance on your loan is 150,000 dollars. This means the equity in your home is 200,000 dollars.
The equity in your home increases as you pay off the loan. The longer you own your home the more equity you have and the more money you will make should you decide to sell in the future.
Tip: If you are looking to pay your house off quicker, you can generate passive income by renting out part of your home. This can be a great situation if you purchase a home with a basement apartment, mother-in-law suite, or detached garage apartment.
3. Expand Your Horizons
Renting a home does not give you any opportunities to broaden your investment portfolio because you are not building equity in the home. However, when you purchase a home and continue to pay on the mortgage, as mentioned above, you are building equity. This is money which can be used for other investment opportunities such as:
- Reinvest Back in the Home – You can use the equity to open a home equity line of credit that can be used to make improvements on the home that will add value.
- Purchase a Second Home – You can use the equity to purchase a second home that will appreciate over time or be used for passive income.
There are many options available to you for investing. The bottom line is you need to choose an investment which will generate wealth. Buying a home allows you to start a wealth generation cycle where you can invest and re-invest without suffering losses.
4. Make Your House Feel Like Home
Do not paint the walls, insert nails, change fixtures, replace the flooring, etc. These are just a few of the Do Nots that you will see in a rental agreement. This places limitations on the ways you can customize a rental home to make it your own. If you do want to make a change to a rental property, more than likely you will have to talk with your landlord and obtain permission. Putting all that aside, who wants to invest money into a property that isn’t yours and in which you will never receive a return on that investment? That is money lost!
When you purchase a home, you can customize it in any way you like. If you want to paint every wall in the home a lime green, then go for it! Not only can you give the home your own personal touch and flair, but it is an investment that you will receive a return on. I think it is safe to say that you probably will not paint every wall lime green, but the improvements that you do make will add value to your home. This will help you receive a higher price for your home should you ever decide to sell.
5. Home Ownership Offers Predictability
After the end of each lease, landlords can choose to raise the rent, change the rules, or even sell the home forcing you to move out. This lends itself to a mountain of what-ifs and unpredictable circumstances. Life offers enough unpredictability without your housing situation bein one of them.
Homeownership offers you predictability. When you choose a fixed-rate mortgage loan, you know what your payments will be for the duration of the loan. This helps you get a better grip on your finances and live a better quality of life.
6. Home Ownership Promotes a Sense of Stability
When you live in a rental home, you know there is a strong possibility that you will not live there for the long run. You are less likely to get to know your community or form bonds with your neighbors. If you have children it can be hard on them to move schools, make new friends, and adjust to a new environment.
When you choose to own your home, you know you are there for the long-haul. This means you are more likely to get to know your neighbors, become involved with your community. Your children will feel of sense of security knowing they do not have to leave their friends or a school and environment that they have become accustomed to.
Quit Throwing Your Money Away on Rentals
Every time you make a rental payment, you are throwing money away that you will never see again! Although renting has its place in the housing industry, it is not a worthwhile investment for someone looking to secure their future.
Owning your home allows you to make a profitable investment, build equity, create additional investment opportunities, make your home your own, and offer predictability and stability for you and your family!
If you’re worried about the need to come up with a hefty down payment, take a deep breath! There are multiple programs through which, if eligible, require only a minimal down payment. With the help of an experienced and knowledgeable realtor, owning your own home is easier than you might think! Stop wishing you were a homeowner and become one!