Buying a home is a major financial step and long-term commitment. Owning a home is the quintessential American Dream, but aside from the feeling of pride it brings, there are plenty of practical reasons to purchase a home.
Consistent Housing Payment
The biggest cost to budget for in your personal life is likely your housing payment. Being a renter means you are at the mercy of your landlord’s lease agreement, and rents tend to rise annually.
With a fixed-rate loan, your monthly mortgage payment will be the same amount every month. Knowing the monthly bill is going to stay the same every month for years to come is a huge relief and makes budgeting for the future much easier.
Staying in the home you bought for a few years can mean walking away with a lot of money if and when you do decide to leave. You may even stay in the home long enough to eventually pay it off completely and not have a mortgage payment anymore!
By comparison, renting can feel unpredictable and like a waste of money, since it doesn’t result in any equity in your home.
Customize Your Space
When you own your home, you’re able to decorate and personalize the space as much as you want. Owning the space you live in means having the freedom to personalize it without the risk of losing your security deposit.
You can finally paint the walls any color of your choosing, and even invest in bigger renovations like replacing the carpet with wood flooring or beautiful tiles without having to get anyone else’s approval. Being able to customize your home is one of the most fun parts of homeownership.
As a homeowner, you can enjoy major tax deductions from mortgage interest and property taxes when filing your annual tax returns. The savings from tax benefits are significant and in some cases make homeownership less expensive than paying rent.
Be Your Own Landlord
Renters move more often than homeowners, and you can save the time and stress of having to pack up and leave. If the landlord decides to up and sell the house or building you are living in, you may have no choice but to relocate, forcing you to face an unexpected financial burden that could have been avoided.
Owning a home and making your monthly mortgage payments on time will help build up your credit score. Having a good credit score means you will easily be able to take out loans to borrow money when you want to, like for purchasing a new car or even buying a second home.
As wealth management advisor and author David Bach explains, renters may throw away over half a million dollars over their lifetimes — $1,500 per month for 30 years totals $540,000 — and own nothing to show for their trouble in the end. When you own a home, every payment brings you closer to paying off the mortgage. Homeowners will accumulate equity over time, which means if the home value goes up, you can capitalize on the higher value when you sell your home for a profit. Paying the mortgage every month is going toward paying off the big loan used to buy the home. Owning a home could mean you are saving money for your future, and it may even enable you to leave an asset for future generations to inherit.
Why Hopeful Homeowners Stay Renters
Though these benefits to homeownership are tempting, there’s no doubt that the rental market is alive and well. The top three reasons I hear people say they opt to rent instead are because of they lack the savings for a down payment, have a low credit score or can’t afford to buy within the area where they are currently renting.
Because rent increases at a faster rate than income, most renters find themselves eventually getting priced out of the homes they occupy. Here in Los Angeles, renters are being forced further east each year. Planning ahead and buying in an up-and-coming neighborhood could put you ahead of the trend and able to buy in a neighborhood before it gets too expensive. In cities with high rental rates, you should keep in mind that you could always rent out the home in the future to make an income from the home.
Even if homeownership seems out of reach right now because of debt or lack of savings, it is a goal renters can work aggressively toward. Lenders can provide options for loans that work for various situations and even offer incentives for first-time homebuyers to receive grants or loans with very low down payments. It may be the case that you can actually afford more than you think!
Stop making your landlord rich, and start investing in your future.