Everyone needs a place to live. But committing to a place to live can be challenging. It’s not uncommon to find yourself faced with a big question: do I try to buy a home, or do I rent a home or apartment?
If you speak to most economists and financial planners, owning a property is almost always more valuable than renting. Yes, there are risks to home ownership. But buying a home – especially an environmentally friendly custom home – has plenty of advantages that you do not find with renting.
Why People Rent or Buy
Renting is not without its benefits. There are some reasons that renting a home can be useful. These include:
- Lower Cost (at the time) – The monthly payments from renting – especially for apartments – are usually, although not always, cheaper than owning a home. You’re getting a smaller space, but you’re also
- Less Emergency Cost – If something breaks in your apartment or home rental, you are almost never under obligation to pay for it yourself. Your landlord will be the one to cover the costs, and may also be able to pay for upgrades as needed.
- Moving is Easy – When you’re renting you’re not married to any city. You can move anywhere you need to at any time. Moving when you own a home is not necessarily difficult either but does involve more planning.
- No Down Payment – There are several down payment assistance programs that you can use to help cover the costs of your down payment. But most loans do require some down payment, and if you’ve had a hard time saving money that can be difficult to put together.
So there are benefits to renting. But home ownership simply has far more advantages. These include:
- Building Equity – The number one reason to own a home is that you can build equity. Building equity occurs in two ways. First, as you make each mortgage payment, some of that payment is going to paying off your balance (called the “principal” payment). When you sell that home, some of that money will come back to you. Second, when you live in a desirable area or neighborhood, your home will gain value over time. Your home becomes both a place to live and an investment. That is why home ownership is the #1 way that people tend to acquire wealth.
- One Monthly Price – Yes, renting can sometimes be cheaper. But it is also not in your control. Rents often go up, even if the quality of the apartment goes down. So while you may be paying more at the time with your mortgage, your price will stay the same while the price of rent may someday grow and exceed the rent payment.
- More Space – Homes are almost always larger than apartments, giving you more space for your money and a lower price per square foot. You also get the privacy that comes from not being surrounded top and bottom by neighbors, as well as your own yard that you can call your own.
Buying a home is more advantageous to your long term financial health than renting by a significant margin, especially if you are going to live in one place for more than a few years.