Buying or renting: What’s right for you? Starting off with some statistics…
- According to a 2018 Journal of Economic Perspectives study, being a homeowner is an opportunity to build wealth, as opposed to renting and paying money to your landlord every month.
- People who continue renting are more financially unstable because they rely more heavily on the rent increase in their local market, and are at the mercy of their landlord.
- Freddie Mac reported that over the last two years two out of three renters struggled more than homeowners to pay off monthly bills.
- *In 2016 almost every one in three renters used 47% of their income for housing, whereas American homeowners used around 30%.
- **The median net worth of owners was 46 times that of renters in 2016.
- Some prefer to rent in order to invest more money in stocks and bonds, but being a homeowner can result in a higher return on investment.
Buying a home can be financially beneficial for many reasons, one being that when getting a fixed mortgage your monthly payments will remain the same and as your career advances the mortgage becomes more affordable and allows you to build equity, as opposed to renting rates that annually increase. As a homeowner, you have more opportunity in the future to lease your home or sell to make a profit once it is paid off and has gained value. Having a loan on your credit report that is paid in a consistent and timely manner can help improve your credit score. You may even qualify for certain tax breaks, especially in the earlier stages when you’re paying off a majority of your mortgage interest.
Homeownership means having more freedom to do things your way, without a landlord. Decorate with your own furniture, paint walls your favorite color, adopt the dog, or cat you’ve been dreaming of, and even plant and grow your own vegetable garden. If you plan on buying in a place that has a HOA (homeowners association), be sure to learn about their rules and regulations first to see if you will be happy in that community as a homeowner. Besides closing costs, insurance, and other fees involved in the home purchase, future homeowners need to consider annual maintenance and repairs.
When deciding whether buying or renting is right for you right now, consider your short and long term goals. Do you plan on growing your family soon? Are you working on expanding your business? Speaking to a professional loan officer can help you lay out your future opportunities and what the next step is best for you. If a low credit score or need more time to save for a down payment are factors that deter you from pursuing homeownership, depending on your circumstance, a mortgage expert can guide you through potential options of how you can own home sooner than you thought possible.