Are you torn between buying and renting a house?
You’re not alone! “Buy or rent?” is a question that has racked the minds of virtually every first-time homebuyer. While both options have their pros and cons, many believe that buying beats renting every time.
Conventional wisdom holds that buying a home is better than renting over the long haul. After all, owning a home is called the American dream for a reason. But do you know the benefits of buying over renting a home?
From enjoying more freedom to financial gains to tax benefits—there are plenty of reasons why many people have chosen to take the financial plunge and purchase a home. Keep reading to learn why we recommend buying over renting.
1. Buying a Home Is Cheaper
Nationwide homeownership is 35% cheaper than renting.
So, if you plan to stay in your new house for more than five years, buying the property is generally a better deal than renting.
And we’ve got the numbers to prove it!
A rent vs. buy study by the listing company Trulia found that buying a home is 37.7% cheaper than renting on a national basis. The study also revealed that buying in major metros like Miami and Fort Lauderdale is 50% cheaper than renting.
Even in pricier markets such as San Francisco and Honolulu, people who can afford to buy can save more compared to renters.
Think about it! If you can own a 4-bedroom home for what many people pay to rent a two or three-bedroom apartment, why not buy the house? You get to pay less and enjoy all the benefits that come with homeownership.
2. Buying Builds Your Credit
Nothing affects your credit score more than your payment history.
Did you know that paying your mortgage on time impacts your credit score positively? For most people, a mortgage is the largest debt they have on their credit report, so how well you manage this debt will have a substantial impact on your credit score.
When you first open a mortgage account, you’ll notice an initial dip in your score, partly due to the hard inquiry into your credit report.
Once you start making timely payments on your mortgage, you should see your credit score begin to trend upwards. Paying a mortgage on time can significantly improve your credit score, but paying the same amount in rent does not affect your credit score in any way.
3. Buying a Home Is an Investment
There’s a realtor’s mantra that says, “Why throw money on rent when you can buy a home.”
Buying a home is considered a solid investment compared to renting because you can build equity. For each month you own a home, you build equity in your property.
That means you own a little more with every payment you make, and with time, you can increase its value by doing necessary renovations and improvements. But when you rent, you pay money that will never generate any returns.
You can even purchase a home then sell it after some time at a profit. Or buy a property then rent it out to generate monthly rental income.
4. There are Big Tax Benefits to Homeownership
Homeowners are allowed to deduct mortgage interests and property taxes when filing tax returns each year. This can add up quickly and lead to significant tax savings, which can help tip the scales if you’re still pondering whether to buy or rent a home.
In contrast, renting a house doesn’t entitle you to any tax benefits.
While you’ll take on a huge financial burden when purchasing a house, tax benefits are a great perk of homeownership. Plus, you pay no capital gains tax on the profit you reap after selling your property, up to a limit of $250,000 for single taxpayers and $500,000 for married filers.
5. You Get More Freedom
If you’re renting a home and you decide to paint the windows or boost curb appeal, you’re increasing the home’s value, but you won’t get to enjoy it.
Simply put, you’re adding value for the landlord. And, you’ll need his permission before you can do any modification to the property. That’s not fun!
But when you buy the property, you’ll have the freedom to do any renovations or modifications that can add its value without seeking anyone’s permission. And if you do a great job and increase the value of the property, you get to keep all the profit when you sell it.
Wrapping Up
In the end, buying or renting a home will depend on your financial strength and personal preferences. But if financing is not a problem, we’d recommend buying over renting.
When you buy a home, you get to save more money while enjoying other financial gains and tax breaks. Not to forget the freedom and excitement of living in your dream home, which renters don’t get to enjoy.
If you still aren’t sure and want to compare the raw numbers, try using our Rent vs Buy Calculator!
