Advantages of owning a home vs renting

One of the most common questions in the housing world has to do with the benefits of owning a home vs. renting. 

Whether you’re just getting started on considering homeownership, or you already have a home savings account in place, it’s important to know the ins and outs of homeownership before you make the leap.

Although becoming a homeowner might at first seem like a giant responsibility, it’s certainly filled with rewards. From building a community to having the creative freedom to make a space your own, owning a home can be an emotionally and financially fulfilling venture.

Advantages of owning a home

Let’s take a closer look at the advantages of owning a home vs renting and see how you can take the right steps to get there.

Homes tend to increase in value 

You’ve most likely heard homeowners talk about how they purchased their home 20 or 30 years ago and now it’s worth this much. 

Because homes tend to increase in value over time, they can be seen as an investment. Rent, on the other hand, assures that you have a place to live, but the money spent isn’t exactly moving you forward in the same way. 

Fixed-rate mortgage 

One of the benefits of homeownership is that when you own, you don’t have to think about rental increases. Often when renting, depending on whether or not there is rent control, a landlord can choose to raise the rent when he or she pleases. 

When you buy a home, a fixed-rate mortgage means that your payment will not fluctuate. It will stay the same for the duration of the loan period. Not worrying about rental increases and equating a fixed house payment into your monthly budget, can ease your uncertainties and help you better plan for the future. 

Find community

Whereas in rental units like apartments or condominiums, the turnover can mean a new neighbor moving in every year or so, home-owning helps to build community. 

Though community exists whether you’re renting or owning, you’re more likely to build community when you buy a home in a neighborhood. Whether it’s for block parties or an annual holiday gathering, community brings about a feeling of belonging and warmth. 

Buying means a tax deduction

When you own a home, the interest payments can be a substantial portion of your overall mortgage payment. 

Luckily, when tax time rolls around, homeowners can deduct their mortgage interest on federal income taxes, giving them tax advantages. In addition, you can do a tax deduction on your property taxes and some closing fees. Being able to deduct some taxes is a great incentive for buying a home.

Make a space your own

If you’re renting, chances are your landlord won’t be too excited when you ask to rip up the carpet so you can see the old hardwood floors or redo the kitchen tile. 

As a homeowner, you’ll enjoy the creative freedom that comes along with making a space your own. You’ll never have to think twice again about whether or not you should really nail that shelf into the wall and risk getting your security deposit back. 

Make an income

Whether it’s through Airbnb or renting out the guest room, owning a home means that you can consider unique ways to make an income off your property. 

In certain cities like San Francisco, it’s even popular to rent out a parking space to someone who works nearby. 

Build your equity

Equity refers to the difference in the loan balance on your mortgage and the value of your home in a given market. 

Similar to a savings account, each mortgage payment that you make builds your equity and allows you to take out home equity loans in the future for needs, like renovations. 

And the home is yours

When you rent, you have no way of knowing whether the landlord might decide to sell or move into the space on their own. 

Owning a home means that it’s yours, entirely. Whether you want to rent it out or build it up and add on, the choice is yours because the home is yours. 

Advantages of renting

Now let’s take a look at the advantages of renting to compare them to home ownership. Understanding both sides can better equip you with the considerations for decision making so you can weigh and make the right choice for your circumstances.

Short-term financial benefit

When you rent a property, there are financial advantages that will be most appealing if you’re seeking short-term financial stability.

No Property Maintenance Costs: One of the biggest perks of renting is that you are not responsible for property maintenance costs. While homeowners have to budget for maintenance and repair costs, renters are covered by their landlord for any property management costs.

Lower Upfront Costs and Security Deposits: Renting also stands out for its lower upfront costs. Purchasing a home involves substantial upfront expenses such as property taxes and homeownership fees. On the flip side, as a renter, you typically only have to navigate security deposits, so thus have a lower initial financial commitment.  

Emphasizing flexibility and reduced responsibilities

Beyond the immediate financial benefit, renting also offers a level of housing flexibility and reduced responsibilities. This can be especially appealing if you have a dynamic lifestyle. 

Ability to Relocate More Easily: As a renter, you have the ability to move to different areas without being encumbered by the complexities of property ownership. This flexibility is particularly advantageous if you have a career or personal circumstances that require changes in location. 

Limited Exposure to Property Market Fluctuations: The property market can be unpredictable. If you rent your property, you benefit from limited exposure to these market dynamics and fluctuating property value, which can provide a sense of financial security.

Landlord Responsibility for Maintenance: Not only does property maintenance cost money, but it also can be a time-consuming responsibility. If you choose to rent, the responsibility for major property maintenance and repairs falls on the landlord. 

Comparative analysis: owning vs. renting

Now that the advantages have been laid out, let’s summarize the comparisons between the two. 

Long-term financial advantages

While renting provides immediate financial relief, owning a home offers the opportunity to build home equity over time. Homeowners accumulate ownership in their property, which offers the possibility to help with long-term financial stability and growth by building equity.

Stability and control

Homeownership provides individuals with a sense of stability and control over their living space. As a homeowner, you have the freedom to make home improvements and create your dream space. 

Balancing flexibility and commitment

The choice between renting and owning involves a trade-off between housing flexibility and commitment. Renting offers greater flexibility, making it suitable if you have evolving lifestyles. In contrast, owning a home requires a higher level of commitment, so may be better suited if you’re seeking a more permanent living arrangement.

Considering the decision-making process

Determining whether to rent or own goes beyond financial considerations and involves a careful evaluation of various factors:

Financial aspirations

Reflect on your financial goals and determine whether you are seeking short-term financial options or are more interesting in the potential for long-term financial growth through home equity accumulation.

Market dynamics

Research the housing market trends in your desired area to learn more about how property values may change over time.

Personal stability

Assess your stability in terms of career, family, and lifestyle. Renting will offer you greater flexibility if your circumstances change, while owning a home can be a more enduring commitment.

Future plans

Anticipate your future plans. Do you envision staying in one location or being open to potential relocations?

Tips for becoming a homeowner 

Now that you’ve read about some of the benefits of being a homeowner, let’s take a closer look at ways to get you there. 

From paying off your debt to saving for a down payment, here are some tips to becoming a homeowner. 

Pay off your debt 

One of the first things you’ll want to do before purchasing a home is to pay off your debt. When you’re debt-free and your credit is great, you’ll be more likely to get approved for the mortgage that will lead you to your dream home. 

Combat the debt to the best of your ability then move forward from there. 

Save for a down payment

Saving a chunk of money for a down payment might at first seem like a monumental task. But you’ll start to notice, if you put away a bit every month and resist the urge to spend, the money magically does start to add up. 

If you’re saving for a down payment, consider staying in for dinner on the weekend or foregoing that extra coffee or cocktail when you’re out. When it comes to saving, small changes can make a big difference. 

In addition to a down payment, you’ll also want to ensure enough funds for closing costs, such as home inspection and home insurance. 

Create an emergency savings fund

Owning a home means that you’re responsible for the maintenance, which may be quite an investment if you buy an older home. If a plumber is needed or the stove stops working, you can’t exactly call the landlord. 

It’s important to keep these out-of-pocket expenses in mind, as these finances will creep up. Before purchasing your home, ensure that you have a savings fund in place with a good chunk set aside for emergencies. 

Once you’ve established this, make sure you don’t spend it. It can be tempting when you’ve just purchased a new home to spend money on decor and furniture. Take it slow and rest assured that all things will come in time, and consider which improvements or purchases need to be made right away, and which can wait. 

Talk to a mortgage lender 

After you’ve saved up and you’re ready to move forward, talk to a mortgage lender to get preapproved for a loan and receive a preapproval letter. 

To do so, the lender will take into account your financial information and help prove that you’re ready to start on the journey towards homeownership. This is an important step, as when you find that right place, you’ll be ready to prove just how serious you are to the seller. 

Find the right budget and the right place

One of the biggest, if not the biggest, parts to buying a home is to find the right place within your own budget. Maybe you’re in love with a spot along the coast, but it’s out of your price range. 

There could be a perfect place a little further inland that’s much cheaper and in line with your financial needs. It’s also good to consider what that place might mean for you in the future. If you plan to or already have children, consider the elementary schools and high schools in the area. 

If you’re quickly becoming an avid hiker, set aside time to hike the area and see how it feels. Maybe sure that you find a place that both works within your budget and serves your happiness. 

Choose your agent wisely 

When it comes to relationships you’ll build during the home buying process, perhaps one of the most important is the relationship with your agent. 

A good place to start is to ask friends and family in the area who they used when purchasing their home. It’s important to connect with your agent and make sure they understand and respect exactly what you’re looking for in a home. Picking an experienced mind is one of the benefits of working with a real estate agent, after all.

Be flexible and open-minded

When purchasing a home, we tend to have a distinct vision of what we want. We might love the idea of a yellow French door, a picket fence, or an all-white kitchen. 

If you stay focused, but go in with flexibility and an open mind, you’ll be more likely to enjoy the process and find something you’re excited about. Remember that a little love and some do-it-yourself home projects can instantly make a house feel like a home.

Consider all the options

At the end of the day, when you’re purchasing a home, you want to make sure you do your research and consider all the options. What works for one person might not work for another. Maybe location is more important to you than the home itself, or vice versa. 

If you’re unsure about whether to rent or buy and where, sit down with a pen and paper and make a classic list. Factor in costs, location, and neighborhood as well as the benefits of renting vs buying. This will help you move through the pros and cons and realize what’s most important on your own unique home buying journey.

To take an exciting step towards owning a home, contact one of our agents today.

Our agents proudly represent buyers and sellers throughout Southern California and use their expertise to ensure a rewarding experience for you.