In a world where housing rental prices are climbing to dizzying heights, buying a home could be your ticket to financial stability. But with mortgage rates also rising, it’s important to understand the implications of renting and buying in today’s market. Review these points before renewing your lease or touring your first open house.
Advantages of Renting
Despite homeownership being traditionally viewed as the ultimate goal, renting still offers many advantages for individuals and families.
When you rent your living space, it’s easier to move from one place to another without the potential stress of selling a home. If your career requires frequent relocations, renting gives you flexibility. You can pack your things and head off to your next adventure without worrying about a home’s sale timeline.
Lower Initial Costs
Homebuying might require that you save for a down payment, earnest money deposit, closing costs, and other fees associated with the purchase. But if you rent an apartment, you usually only need to pay a security deposit and the first month’s rent before unpacking your first box.
Fewer Ongoing Costs
Homeowners are responsible for paying property taxes and homeowners insurance, which can take up a portion of their budget. If you rent, you aren’t accountable for these costs, it's usually included in your monthly payment. Plus, when you rent a house or apartment, the landlord is responsible for maintenance and repairs.
Some rental properties have amenities that would be expensive to own, such as pools, gyms, and other recreational facilities that renters can take advantage of.
Advantages of Homeownership
There’s a reason the United States has a homeownership rate of 65.9 percent. In fact, there are several. Here are a few that are worth considering.
If your home value goes up, you can build wealth through equity. For example, if you bought a house for $500,000 and the fair market value increased to $600,000, you might sell it for a $100,000 profit. Plus, eligible homeowners can access those profits without selling the home if they’re approved for a home equity loan or home equity line of credit.
Homeowners can deduct mortgage interest and property tax payments at tax time. These deductions could help reduce the amount owed in federal taxes.
When you choose a fixed-rate mortgage to finance a home, payments stay the same for the life of the loan. There’s no need to fear a landlord raising the housing payment or changing the terms of a lease.
Homeownership gives you control over your living space. Paint the walls in whatever color you want. Tear out the carpet. You can make changes and renovations as you see fit without getting landlord approval.
What about Rising Mortgage Interest Rates?
Even though interest rates are trending upward, one fact about owning a home does not change – it offers financial benefits that renting does not. Homeowners can build equity in an asset that’s often worth more with each passing year.
Before you exit the rental merry-go-round and enter the world of homeownership, understand how both options might affect your long-term financial goals. Learn more about the mortgage loan process or speak with a loan officer at (877) 820-2265 today!