Why is it Better to Buy a Home Instead of Renting?
The differences of renting vs. buying a home aren’t just limited to ownership. There are a number of reasons why buying is better, when the time is right.
Build Up Equity
One of the most important reasons to buy rather than renting is to build up equity in your home. When you rent, each month you pay is cash that will never come back to you. However, when you buy, you are paying down the balance of the home loan each month, so that you will capitalize once you sell it. Plus, if you buy at the right time, you can profit from the rise of your home’s value.
No Raising Monthly Payments
When you rent, you are always at the mercy of your landlords. Of course, there are laws that prevent significant rent raises and contracts to protect you, but you can never be 100% sure. With a fixed-rate mortgage, you will know exactly what your payment will be for at least the next few years. This allows you to accurately budget for the future with no surprises.
One Day There Will be No More Payments
Buying a home sets you up for the possibility of pure financial freedom one day. Many people strive to pay off their mortgages as quickly as possible, so that they own their home free-and-clear. Meanwhile, renting without the intention of ever buying a home means that you will always have a monthly payment to make.
A Possibility for Passive Income
Buying a home can open up doors to rent out the property, should you have to move to another city, take an extended vacation or if it simply makes sense in a high-rental market. This option for an additional income stream can be extremely useful if you need cash flow for a new business or project you are working on. When you are renting long-term, you are the one providing the cash flow to the owner.
Accumulate Wealth to Buy More
As you build up equity in your home, you can use it to refinance your property to purchase a second property. Whether to rent for an income, for vacations or as an investment if you get a good price, buying one home can be the basis for a strong real estate portfolio.
If You Need Flexibility, Renting is For You
Buying a home is the better option, but only when the time is right. If you have just moved to a new city, are still figuring out your career options or aren’t ready for the commitment of home ownership, there is no problem at all in renting.
However, it is always best to think about how and when you can buy your first home. Even if it may be years away, creating a plan of saving for a down payment and ensuring your credit is healthy will make sure you have the option open to you, when the time is right!