Buying a home is one of the biggest financial decisions that you will make in adulthood and for many people, this may be seen as a part of the “American Dream.” While it can feel good to own something rather than rent, it’s not for everybody and can come with costs and limitations.
If you’re having a hard time deciding which option is best for you, consider the differences between owning a home versus renting.
Owning a home is a hefty goal for many people, but it can come with several important advantages.
#1: Long-Term Investment
It’s important to think long-term during the homebuying process. As a general rule of thumb, people are encouraged to purchase a home if you plan on staying there for five years or longer - as this gives your property time to grow in value.
Plan on maintaining or improving the condition of your property, as this is what makes for a good long-term investment. Even if the value of your home depreciates over time, it’s possible the land could become more valuable.
#2: Building Equity
Equity is the difference in the value of your home and what you still owe on it. Every time you put a payment toward your mortgage, your home equity grows. Equity is important to have, as it can help you build wealth over time.
#3: Stability & Consistency
Obtaining a fixed-rate mortgage means that you will pay the same amount each month for interest and principal until the mortgage has been paid off. Conversely, rent can increase with every lease renewal or move. Having a stable mortgage payment can help you avoid increases in your housing expenses.
Since you own the property, you can renovate it however you want. Renters do not enjoy this benefit, meaning any landscaping or home alterations wouldn’t be up to them. Being able to renovate and update your home gives you the potential to increase its property value and overall satisfaction while living in your home.
While there are some advantages, there are things to keep in mind if you are looking to rent.
#1: No Renovations or Alterations
Even if you would like to make updates or additions to the rental property, you are not able to since you don’t own it. Some landlords may allow you to paint or make minor adjustments, but these would need to be approved beforehand.
#2: Your Rent May Increase
If you have been budgeting and factoring in a certain amount of rent each month, this amount may change when it’s time to renew your lease. Landlords have the right to increase your rent when it’s time to renew your lease, although you may be able to renegotiate the terms.
#3: It Won’t Improve Your Credit Score
Paying your mortgage on time every month can be an effective way to improve or maintain your credit score. Paying your rent on time each month is important, but it won’t necessarily improve your credit score.
#4: Your Home Isn’t Building Value
Because the home you are renting isn’t yours, the money you pay in rent isn’t working toward building equity.
Every individual has a situation that is unique to them, so for some people, it may make sense to purchase a home while others would benefit from renting. The pandemic has certainly changed the way that we live, so this can come into play when trying to decide what your next move should be. If owning a home is what will benefit you most, visit my website today!