Many renters can agree that they want to buy a home, they just can’t figure out how to afford it. Well, it’s time to set the excuses aside and learn about the true benefits of buying vs. renting. Because in today’s market, buying a house truly is a solid investment. Here’s why.
Increase your wealth
When paying your mortgage each month, a portion of that payment pays down your loan principal, which in turn, increases your equity. This is often called a “forced savings,” and because of that, home equity can be a long term strategy for building wealth. Your money is essentially locked up and slowly growing with the market. Though, in some areas like Denver, it may be rapidly appreciating.
Your equity can be left alone to grow over the years, or it can be accessed as cash to be used however you’d like — pay off debt or reinvest in your home through renovations.
According to Daren Blomquist of ATTOM Data Solutions, it’s good to be equity rich. Blomquist says, “For most people, the ideal use of that home equity will be for retirement. So it’s a worthy goal to take a long-term view of that equity.”
Avoid rent increases
If you choose a fixed-rate mortgage, your monthly mortgage payment will (almost) never change. Of course, if taxes or insurance go up (or down), your payment can change, but it’s certainly not as much or as often as a rent payment can change.
As a renter, you could be looking at rent increases every year or two, unless you reside in a rent-controlled building. Let’s not forget every time you move there is a security deposit to consider. Why subject yourself to costs and fees that benefit a landlord instead of yourself?
Enjoy tax benefits
Sure, you have to pay property taxes when owning a home. However, those fees are tax-deductible. The same goes for mortgage interest payments.
Deductible mortgage interest is any interest you pay on a loan secured by a primary home or second home that was used to buy, build, or substantially improve your home. For tax years prior to 2018, the maximum amount of debt eligible for the deduction was $1 million. For tax years after 2017, the maximum amount of debt is limited to $750,000.
Pride of ownership
Owning a home is empowering. You can paint, landscape, and decorate however you’d like. Even knock a few walls down. There are little to no restrictions, plus you’re able to establish a sense of community as you put down roots within a neighborhood.
Should I buy a home or rent?
Before you leap into homeownership, be sure to weigh the upfront and maintenance costs that go along with owning a home. There’s a down payment to consider, closing costs, and often property upkeep (landscaping and home repairs).
If you’re not certain you want to “settle” in Denver, or maybe you don’t feel secure about your employment, it’s okay to wait. A home is an investment. You want to be financially stable so you don’t end up house poor. The best course of action, in this case, would be to try some mortgage calculators out to see how much home you can afford. This way, you can create a manageable timetable to help you save for that dream home.