Is Buying a Home Financially Better than Renting?
Buying a home or renting ― which makes better financial sense?
According to a recent report published by Forbes, homeownership in the United States is indeed cheaper than renting. In fact, when you consider current interest rates and home prices, purchasing a home is, on average, 38 percent less expensive than choosing to rent.
Trends in the Marketplace
Home prices in many areas of the country have increased steadily over the last few years. But low mortgage rates have kept homeownership affordable, and as long as rates remain low, buying a home will continue to be more cost-effective than renting in most U.S. markets.
Based on the Forbes report, buying is better than renting until mortgage rates reach 10.6 percent. With current rates fluctuating near a historically low 4 percent, most people may find that homeownership makes great financial sense.
Benefits of Homeownership
Many areas of the country are still recovering from the housing crisis of 2008, and home values continue to reflect this lingering trend. Though it is always wise to be cautious, buying a home is often considered a good investment because it gives you the opportunity to build equity.
With every mortgage payment you make, you get closer to owning your home. Once the equity in your home exceeds 20 percent of the loan value, you can borrow against the equity or refinance your mortgage at a more favorable interest rate.
According to housing and financial experts, most people see their home costs offset by their equity and increased value after only 5 to 7 years.
Homeownership also gives you the ability to claim income tax deductions that are not available to renters. When you file your taxes, you'll be able to deduct your property taxes and your mortgage interest, which makes a significant difference for most people come April 15!
Factors that Affect Homeownership
Are you relocating to a new area of the country? Renting may make sense for a short time ― six months to a year ― as it will give you time to determine exactly where you would like to live. This also offers you a stable track record at your job and allows you to financially prepare for buying a home.
Renting also may be a good idea if you have any career or income uncertainty, as either could change your borrowing and relocation ability.
Buying a home, however, gives you the ultimate level of control and stability. Not only can your rent be raised, but you also could be asked to move at any time.
Homeowners enjoy the security of making their own decisions about their homes and they benefit from any improvements they make to the property, while renters may not even be free to paint the walls. For many, this is yet another compelling reason to purchase a home.
If you're thinking about becoming a homeowner, let the Edie Israel team help make your dream a reality. Each member of our experienced team is a licensed Realtor®, and we are uniquely qualified to help you navigate the complex but financially beneficial process of buying a home.