Renting vs Homeownership

While you can find a nice place to live whether you rent or buy a home, the two experiences can change your life in different ways. Not sure whether renting or homeownership is right for you? See how the two stack up.

• • With homeownership, your savings grow whenever you pay your mortgage. Sure, owning a home requires you to make a monthly housing payment just like you do as a renter. However, whenever you make a mortgage payment, a portion of it goes toward paying down your mortgage balance, and the equity in your house increases. Equity is a form of savings so as you pay your mortgage, you increase your wealth. You don’t gain that savings buffer when you are a renter. In fact, when you are a renter, your entire monthly payment goes to your landlord.

• • With homeownership, rising rents are a thing of the past. With a fixed-rate mortgage, your mortgage payment stays the same year after year. On the flip side, your rent is likely to rise year after year if your landlord wants to charge you more money. That means if you are a homeowner, you won’t be blindsided by a rent hike when your lease is up. But if you are a renter, a sudden rent increase can wreak havoc on your entire budget.

• • Homeownership gives you tax advantages. The Internal Revenue Service lets homeowners deduct what they spend in mortgage interest and on property taxes each year when they file their tax returns. That means you might get a higher tax refund if you become a homeowner, and that extra money can be used to pay off debt, invest or even take a dream vacation. In contrast, you don’t get any tax deductions for paying your rent, so you may end up paying more to Uncle Sam if you are a renter.

• • Homeownership gives you more financial options. The equity in a house can be used for anything you want. For example, you can use it to start a business, invest, pay off debt, pay for education or take care of medical bills.

Since you gain no equity when you rent, you don’t have those options if you are a renter. As a result, you may be more dependent on your savings account or credit cards when you have an emergency or need funds.

• • Homeownership gives you a legacy to pass down. If you have children or other family members that you want to pass assets down to, a home gives you something tangible to leave for the next generation. Your children, grandchildren and great-grandchildren can all benefit from the legacy that you build. Even if your descendants don’t want to live in your home, they can rent it out or sell it and benefit from the income your property generates.

If you rent, your home remains the property of your landlord after you die. As a matter of fact, any loved ones who live with you may be forced to move.

• • Homeownership lets you unleash your creativity. Do you prefer purple ceilings and built-in bookcases or have very specific ideas about how you want your home to look? When you are a homeowner, you can decide what color to paint your walls and decorate in any way you see fit. If you are a renter, you may have to comply with your landlord’s rules, which could keep you from having the home décor that you prefer. For example, some landlords don’t allow renters to paint their walls or make changes that could be permanent. Even if your landlord allows you to make improvements to a house or apartment that you are renting, do you really want to spend your money adding value to your landlord’s property? It may make more sense to use your money making improvements to a property of your own.

Even if your landlord allows you to make improvements to a house or apartment that you are renting, do you really want to spend your money adding value to your landlord’s property? It may make more sense to use your money making improvements to a property of your own.

• • Homeownership may provide another stream of income. No matter how much money you make, chances are you can use some more. If you own your home, you may be able to make money off of it. For example, you can rent out a room on a site like AirBnB or simply rent a room out to a family member or friend. That would bring in passive income that can be invested or used to build wealth in other ways. Once you become a homeowner, you may also decide that you like being a landlord and start a business by buying and renting out other properties.

If you are a renter, you won’t have these options. Instead of benefiting from other renters making you rich, as a renter, you’re basically making your landlord rich.

• • Homeownership may give you more privacy. If you have your own home, you may be less likely to share a wall or common areas with your neighbors. That means it’s easier to make sure what happens in your home remains only your business. As a renter, on the other hand, you may be more likely to have to deal with your neighbors’ concerns and wishes. If privacy is a priority for you, homeownership may be more appealing than renting.

As a renter, on the other hand, you may be more likely to have to deal with your neighbors’ concerns and wishes. If privacy is a priority for you, homeownership may be more appealing than renting.

• • Homeownership may provide you with more freedoms. As a homeowner you may have more control over your lifestyle. For example, if you are a pet lover, you can choose to get a pet. But if you are a renter, you must have the approval of your landlord before you can bring home a furry friend. When you are a homeowner you are more in control over your daily circumstances than if you are a renter.

Is homeownership starting to look better to you now? Call HomeFree-USA to take your first steps to becoming a homeowner now.