After years, or even decades, of living in your current home, you’re excited about making a change. Whether you’re contemplating moving to a new state or staying nearby, downsizing, or ensuring you have enough space for the grandkids, you’ll face one key question. Does it make more sense to purchase a home or rent one?
Though each option has pros and cons, buying provides more pros, with a broader range of benefits. If you’re at the crossroads of deciding on your next residence, you’ll want to keep these six advantages of home ownership in mind.
1. You’ll enjoy tax and equity benefits. There are numerous financial advantages to buying a home. For one, you’ll be able to deduct the interest you pay on the first $750,000 of your mortgage1. As you build equity, or ownership, in your home, you can tap into that equity to cover expenses, including remodeling or renovation. A reverse mortgage is another way to borrow against the value of your home while still maintaining ownership.
2. You’ll be building generational wealth. Owning a home you can pass on to your family is one of the best ways to transfer wealth from one generation to the next. Your home will provide your family with memories of times spent together enjoying a BBQ in the backyard or gathering in the kitchen to blow out the candles on a birthday cake. And its value will contribute to a comfortable future for your children and grandchildren.
3. Your monthly expenses will be more stable. If you own a home, your monthly mortgage payments will pretty much stay the same, particularly if you have a fixed-rate mortgage loan. This is crucial when you’re on a fixed income. The cost of renting, however, can be unpredictable and subject to sudden increases at the end of the lease. This is especially true as more property owners adopt “dynamic pricing,” when rents fluctuate based on market conditions. What’s more, if your landlord sells your rental home or apartment, you might face a hefty increase or even a refusal to renew your lease.
4. Your cost of living might decrease dramatically. If you’re in the position to buy your new home outright – perhaps because you’re selling your current home and downsizing – you won’t have a mortgage to pay off. Although you may still need to pay property taxes or maintenance fees, you’ll eliminate what’s typically the largest monthly expense.