You probably hear a lot of arguments regarding why renting is better than buying. But, have you ever thought about the flip side of that equation? Is it ever better to buy rather than rent?
There are certainly times when it makes more sense to rent than buy. Keep reading to learn whether these situations apply to you.
It’s a Forced Savings Account
Do you have any money invested? If not, when you buy a home, you not only have a place to live, but you have an investment. Every time you pay your mortgage, you invest money. Yes, some of the money goes towards interest, but the rest hits the principle of your loan. This turns your money into equity. Every little bit add up and eventually you’ll see a decent return on your investment. This can be the largest and sometimes the only investment some borrowers have.
You Don’t Have to Worry About Increasing Rent Costs
Your mortgage generally doesn’t change unless you have an adjustable rate mortgage. If this is the case, you know the worst-case scenario, or how much your payment can change at once or over the life of the loan. When you rent, there’s no way to predict how much rent the landlord will ask for from one year to the next. You could find yourself paying way more than you ever wanted to for rent, but also feeling stuck if you can’t find anywhere else to move to.
You Can do What you Want to the Home
When you rent, you can’t make any permanent changes to the home. Even some cosmetic changes may be questionable. If you own the home, though, you are free to do what you want to the home. Of course, if it’s anything structural, you will have to get the approval of the city/county first. But any cosmetic changes and even some ‘major changes,’ such as a kitchen renovation can be done without asking anyone for permission.
You Can Borrow Your Own Money
When you invest money in your home, it stays in the home’s equity. But if you need cash, you can tap into it by refinancing your first mortgage or taking out a home equity line of credit. The benefit of getting cash this way is the lower interest rates and favorable terms that are often provided because you put your home up for collateral. Of course, it’s in your best interest to pay the loan back quickly so that you can have that equity again, but knowing that it is there can give you peace of mind.
Buying does make more sense than renting sometimes. Of course, it only makes sense if you can afford the payments comfortably and if you have the ability to maintain a home. You will be responsible for the insurance and taxes on the home too, which adds to the expenses, but in the end, it often comes out as the better option.