Whether to buy or rent a house is one of the most significant decisions you will have to make when looking for a place to call home. This decision will not just affect the amount of money you have left in your bank account at the end of each month; it will also affect your lifestyle and the savings you accrue over the years. In this article, Summit Way Realty discusses buying vs. renting along with the benefits of owning a home.
Buying vs. Renting
Let’s be honest: buying a property is no small expense. Apart from the initial cost of purchasing the property, there are recurring insurance payments and property taxes to make, as well as the upkeep and maintenance, which can get quite expensive, quite fast.
On the other hand, renting involves paying a monthly fee to stay in a house owned and managed by another person. One of the reasons some people prefer renting is because it does not involve too many overhead costs. However, it does have its shortcomings, which, in the long run, could mean a world of difference.
Despite the costs of buying a house, there are many benefits of owning a home vs renting that most people do not know.
Associated Costs of Owning Vs. Renting
Owning a home offers more freedom compared to renting. The disadvantages of owning a home are financial commitments and many new responsibilities that require your attention. If you opt to buy a home, some of the costs you will have to deal with include:
- Deposit
- Survey cost
- Title Company Fees
- Appraisal Fee
- Monthly bills – such as gas, electricity, home phone, etc.
- Mortgage
- Home maintenance and repair costs
When renting, there are still costs you need to consider. Apart from your monthly rent payment, there are several housing-related costs that you must factor in when picking a place to live. Some of these costs include:
- Application fees
- Security deposit
- Utilities
- Renters insurance
- Amenities fee
- Sudden rent increments
While renting might seem like the cheaper option, the economic benefits of homeownership can be more rewarding in the long run.
The Benefits of Owning A Home
1. Stable Monthly Payments
If you plan on buying a home using a mortgage, chances are the mortgage option you will use is a fixed-rate loan. The great thing about fixed-rate mortgages is that the monthly payments are constant, which is one of the benefits of buying a home.
One of the main issues with renting is that you are never sure about the amount your landlord will require you to pay per month, year over year. Some property owners have been known to change the monthly rent payments upon renewing their lease agreement.
Paying fixed monthly payments can provide peace of mind since, making it easier to predict your monthly budget. And while these monthly payments can change with homeowner’s insurance or property taxes, the difference is often minimal.
2. Enables You to Build Equity
One of the advantages of owning a home is that it allows you to build equity. In real estate, equity refers to the probable market value of a property minus the property’s liens, such as a mortgage. The longer you own a property, the more you will pay towards its liens’ principal balance. As this balance gets lower, and hopefully, the property’s value increases, the larger the equity. The more equity you have, the more you own the property. Simultaneously, the more the equity your property has, the easier it becomes for you to sell.
3. Cheaper than Renting in the Long Run
The cons of owning a home are the costs including the down payment, homeowner’s insurance, and appraisal fees, amongst other things. However, while the upfront cost of buying a home is more than paying monthly rent, over time, owning a property is cheaper than renting; especially, after you are done settling your mortgage. Settling your mortgage allows you to spend the extra money you have on other things like improving your home.
4. Freedom to Make the Changes You Want
When you rent, it is almost impossible to make even the slightest change to the property as most leases dictate that you should not alter the rental in any way. On the other hand, owning a property offers you the freedom and flexibility to make changes as you see fit. Since there are no restrictions on what you can do, you are free to do something as complex as a complete kitchen remodel or as simple as painting a bedroom. Not only do these changes allow you to make your house feel more like a home, but they also can increase the value of your property.
5. Builds Your Credit
There are tons of factors that affect a person’s credit score, and one of them is the length of the individual’s credit history. One way to improve your credit score is to improve your credit accounts’ average length and owning a property can help you accomplish this goal.
Since mortgages typically take about 15 to 30 years to pay off, having a mortgage reflecting on your credit history is an excellent way to extend the average across your credit accounts. Apart from that, each month you pay your mortgage on time, it shows that you are a responsible borrower. That not only improves your credit score, but it also improves your chances of getting approved when seeking credit in the future. While paying your mortgage on time improves creditworthiness, you do not enjoy the same advantage from rent.
6. Buying a Home is a Solid Investment
There are lots of options when it comes to investing in your future, and owning a home is one of them. While buying a home is a significant investment, it is one that provides you with a far better ROI than other significant purchases like a car, for instance.
When you buy a car, its price starts depreciating when you drive off the car dealership’s lot. But owning a house, on the other hand, provides the opposite as the cost of real estate generally appreciates with time – though this is contingent on local market conditions.
However, it is worth noting that real estate markets are quite different, even if they are close to each other. With that being said, it is advisable to ensure that you know what to expect of a property in terms of its potential to appreciate over the years before you decide to buy.
Final Thoughts on the Benefits of Home Ownership
When deciding whether you want to rent or purchase a home, make sure to look at all the advantages and disadvantages of renting a house. While an experienced and professional real estate agent can’t precisely predict what will happen to property values in a given area, they certainly can provide you with information on how property values in the area have fluctuated over the last few years.
If you would like to know more about the benefits of owning a home or want to invest in one, give Summit Way Realty a call today and speak to one of our professional real estate agents.
