What are the advantages of buying vs. renting?

There are big benefits to homeownership that renting doesn’t provide you with. The top reasons for buying instead of renting a home include building equity, better psychological outcomes, design and lifestyle freedom, payment predictability and tax benefits.

If you’re able to afford either option, owning a home means you’re paying towards your own investment—while renting means spending your hard-earned money on something you don’t own and could possibly change, for factors outside your control. Let’s dive into how buying a home may be a better choice than renting.

1. Equity building

The longer you live in and own a home, the more equity you’ll build—meaning you’ll have money in your home that’s able to be used. Your home equity is the portion of your property that you own, and with each mortgage payment, your equity increases. Essentially, it’s the appraised value of your home minus your mortgage balance. Upgrades like building new bathrooms or installing energy-efficient windows also build your equity, because you’re increasing your home’s value. Plus, due to the growing demand for housing, homeowners have worthwhile investments as home prices have been on an upward trend over the past 10 years.

As a renter, your monthly payments are likely going towards your landlord’s mortgage. Technically, you’re paying for something you don’t necessarily own. This is a big reason why buying a home is much more valuable for your financial future and wealth-building.

When you’ve built enough equity, you can actually use some of that financial power to fund renovations or even your child’s tuition. A HELOC, which is a line of credit secured by your home’s equity, and a HELOAN, which is an additional loan using up to 95% of your home’s equity, are two common methods in which you can access equity for important purchases.

2. Better mental health

Several studies have shown that homeownership not only has a positive effect on the mental health of homeowners, but also their children.

In a study explored by the National Association of REALTORS^®, homeowners and their children are less likely to drop out of school, participate in their communities, and are generally happier and healthier, with less stress-related diagnoses. Habitat for Humanity also concluded similar findings. Researchers from the University of Health Sciences and Pharmacy in St. Louis discovered renters have a higher prevalence of depressive disorders, reduced concentration and poorer physical health across various age groups.

3. Design and lifestyle freedom without a landlord

As a homeowner, you’ll have the ability to switch out your appliances for a more modern look or repaint all the walls inside and outside your home—without asking for permission or providing a weeks-long notice beforehand. The choice is truly yours if you have the budget to pay for these updates and leave financial breathing room for repairs and maintenance.

Of course, if you’re a member of a homeowners’ association, there may be some guidelines you’ll need to follow when it comes to your home’s exterior, from design and landscaping limitations to acceptable seasonal decorations. Still, these will likely be much less limiting than the restrictions of a leased building or rental community.

Without the regulations of a landlord, you’ll have more freedom to live the lifestyle you want. As long as you’re not breaking any of your HOA’s rules, you’ll be able to:

• Adopt the animals you’ve always wanted, whether that’s a pair of larger-breed dogs or a turtle with its own outdoor pond
• Build the swimming pool of your dreams
• Convert your basement into a studio, so you’ll have a dedicated space to record music or create art
• Expand your backyard with an outdoor brick-oven for pizza nights
• Design the garden of your dreams to grow fresh produce from your own backyard

As long as you’re complying with local ordinances, the possibilities are endless in creating your dream life.

4. Payment predictability

A major benefit in being a homeowner is having a level of predictability when it comes to your monthly payments. While your rent payments could change for a variety of reasons, a fixed-rate mortgage protects you from unpleasant surprises like rent hikes.

Unless you have an adjustable-rate mortgage,which fluctuates based on market conditions, a fixed-rate mortgage gives you peace of mind so you’re able to budget accurately without the fear of unexpected increases in your monthly mortgage payments. If you’re a renter and rent rises to an amount higher than you afford, you may have to consider leaving, despite all the time and money spent making your space feel like home.

5. Tax benefits

Owning a home can save you money on your income taxes. Additionally, your mortgage interest can be tax deductible as well as the amount you paid on that year’s state and local property taxes.

If you’re thinking it’s a wash because you didn’t have to pay property taxes while renting, think again. Most landlords will fold those costs into your rent, so while you may not see it, you’re still paying it. Remember, homeowners must itemize deductions to get the tax benefits and potential savings.

To be eligible for the property tax deduction, you must pay taxes during the year you want to claim deductions—meaning prepaid property taxes for the future can’t be deducted just yet. For specifics, get in touch with your tax professional to find out how much you could deduct.

If you’re deciding between buying a home or renting, becoming a homeowner may come with benefits like creative freedom, a predictable budget, wealth building, tax savings, improved mental health and the ability to create your dream lifestyle. Get in touch with loan officers near you and find out how to get started, so you can create wealth and your dream life on your own terms.