Owning a home might seem like a big expense to some, but for most people, it’s worth it to have the emotional connection to a home you own, and a sense of stability that renting won’t bring. There’s also a financial benefit that those who are renting won’t see, like the chance to profit when you move and sell your house, or the chance to live mortgage-free someday.
Let’s be frank: Buying a home is no small expense. Not only are there recurring property taxes and insurance payments to make, but maintenance and upkeep gets expensive, fast. Business Insider contributor Kate Dore, a homeowner herself, recommends that the typical homeowner should plan to save between 1% and 4% of a home’s value for maintenance.
But, those costs aside, there could be huge benefits. Consider that someday, your house might be worth more than you paid for it, and you’ll move on at a profit. You might also have a potential for future passive income, if that’s the route you want to take. And paying off your home to live mortgage-free can set you up for a comfortable retirement.
And then there’s the emotional appeal of owning a home — the house is yours, and for some people, you can’t put a price on that.
Buying versus renting a home is a very individual decision. Below, homeowners weigh in on why buying was the right choice for them.
Owning a home allows you to build wealth to purchase future homes
Business Insider contributor Eric Rosenberg says that owning homes has been one of his smartest financial decisions yet.
He says that by owning homes in both Denver and Portland and selling each at a profit, he was able to buy a home in southern California he likely couldn’t have afforded otherwise.
Lookinhg back on his buying and selling experience in Portland, Rosenberg says, “we only kept that home for about 14 months. But in that time, just over a year, the value of our house went up by about 20%. For our house, that was about $100,000 profit over what we paid.”
And, buying could help to increase your net worth in ways renting can’t
“I’m a firm believer that owning a home is better than renting in most situations,” Rosenberg writes, adding that those who plan to stay in their home for a long time and who want to build their net worth can see big benefits.
“Owning a home helps you build a valuable asset that is worth more than just a place to live,” he continues.
Not everyone agrees. While many homeowners build wealth as their homes gain value, others don’t, and regret buying in the first place. Others would rather put their money somewhere it grows faster. Self-made millionaire Chris Reining told Business Insider’s Tanza Loudenback that buying a home was one of the worst decisions he’s ever made, because he would have seen much greater returns investing that money in the stock market.
Just like the initial decision to buy a home, how it affects your wealth varies by person.
You’ve got a shot at significantly lowering your living expenses someday
For many, the prospect of living rent or mortgage-free someday is alluring. That’s not something you’ll ever be able to do as long as you’re renting.
Business Insider contributor Holly Johnson and her husband decided to pay off their mortgage by 40. “Not having a home mortgage payment is one of the best things we’ve ever done for our finances and our sanity,” writes Johnson.
You’ll still have some things you’ll be responsible for paying for, like insurance and property taxes. Johnson says that they spend about $3,400 per year on taxes and insurance, and that’s minimal when compared to the costs of renting.
You’ll have an opportunity for passive income
Buying a house isn’t just a money move for now — it’s something you’re going to be committed to for quite a long time.
And that said, you’ll have to consider what you’d want to do with it once it’s time to move on. For some, that comes to renting out your home for passive income, and maybe even while you’re still living there.
Personal finance blogger and podcaster Paula Pant told Business Insider’s Hillary Hoffower that she and her husband bought a triplex in Atlanta, Georgia. They lived in one unit and rented out the other two. By doing this, their tenants completely covered their mortgage.
Pant has owned eight houses, and they still own that duplex and now rent out all three units.
No one will sell it out from under you (or raise the rent)
Ever renewed your lease only to find out that your landlord is raising your rent again? That wouldn’t happen with a mortgage.
Rent hikes aren’t uncommon, especially in expensive rental markets. As Apartment Therapy’s Gina Vaynshteyn reports, “tenants in New York City can expect their rent to increase with inflation, which landlords usually translate as 3% per year.”
Business Insider contributor Elizabeth Licata writes this is one of the reasons she feels more stable as a homeowner. “A landlord has the ability to raise rent prices or unexpectedly decide to sell the apartment entirely,” she writes. “Since we own this place, we don’t have to worry about suddenly having to move ever again.”
You get to make it your own
Have a kitchen you don’t love or a bathroom that’s in serious need of an update? When the house is yours, it’s your call.
You can do whatever you’d like to the house you own, from full remodels to painting the walls. You’ll have a lot more flexibility in all of these things, and for many, that’s a seriously appealing part of buying your home.
“Now that I know we’ll be in this house for several years, I feel like it’s worth investing time and money into it,” writes Licata. “Now I’m adding cabinets to my office and building a sewing room in the basement, because that is what will make the space the most useful for me.”
When you own your home, you’re able to do exactly what you want with it.
It’s more stable and familiar
“Having a baby made me more interested in the idea of stability and familiarity,” Licata writes, having rented and moved frequently prior to buying. “Buying a house meant our daughter would always have a place to call home, friends who lived nearby, and the opportunity to go to school in a great school district.”
You’ve got the chance to get a great deal
If you have some extra cash on hand and a bit of patience, it’s possible to get a great deal and make your new home worth more than you paid.
Business Insider contributor Clint Proctor writes that he “paid nearly the same amount in repairs and remodeling expenses as we spent on our down payment and closing costs ” for his fixer-upper in Florida. “And this doesn’t even include the cost of paint, appliances, furniture, and other move-in costs,” he says.
“But we were willing to pay a little more cash upfront for a killer deal,” he continues. “And, today, we couldn’t be more happy with our home — and we definitely love our monthly mortgage payment.”
Original article found at https://www.businessinsider.com/personal-finance/why-buying-a-home-is-better-than-renting