Wealth Benefits of Owning a Home vs. Renting

Are you considering buying a home in New York or New Jersey but wondering if it's worth the investment compared to renting? Buying a home is a significant investment and can be daunting, especially for first time home buyers. It’s a big decision to jump from renting to owning, so it’s necessary to do your research.

In today's economy, with the rising costs of rent and inflation, it's no surprise that more and more people are considering owning a home versus renting to secure their financial future. The long-term benefits can be substantial despite the up-front costs of purchasing a home. While renting offers flexibility, homeownership offers numerous wealth-building opportunities that can lead to lasting financial stability.

In this blog post, we’ll explore the advantages of owning a home versus renting, including the following:

Wealth benefits of homeownership.

• Equity appreciation
• Tax savings
• Hedge against inflation
• Control over your home
• A place of your own

Overcoming interest rate and home price anxiety.

Wealth benefits of homeownership:

1. Equity appreciation.

Buying a home has many benefits, but one of the best is building equity over time. Equity is the difference between your home's value and the amount you owe on your mortgage. As you make your mortgage payments and your home increases in value, so does your equity. So if you decide to sell your home and have built substantial equity, you can use it for other investments. In addition, you can opt for a home equity loan if you ever need to use your equity for investments or expenses. When you rent, however, you're essentially building someone else's wealth by paying off their mortgage and missing out on the opportunity to increase your own wealth.

2. Tax savings.

Homeownership comes with many perks that tenants miss out on. Depending on where you live, you may get numerous tax credits and property deductions as a homeowner. Mortgage interest, property taxes, and closing costs can generally be deducted, effectively lowering the overall cost of homeownership and increasing wealth. Unfortunately, renting doesn't offer any of these benefits. Consulting with a tax professional is always a good idea.

3. Hedge against inflation.

Buying a home is also an excellent hedge against inflation –the inevitable rise of prices over time. When you own your home, your mortgage payment is usually fixed, which means that while everything else becomes more expensive, your monthly housing cost remains the same. Effectively, your home's value will increase in real terms. When you rent, your payments may increase as landlords frequently raise rent to compensate for rising ownership costs. In tandem, when your rent increases and everything else costs more, you might have less money for other expenses or investments.

4. Control over your home.

When you own your home, you have complete control over it and can increase its value. However, when you rent, you don’t. As a homeowner, you decide when and how to upgrade and improve your property to increase its value and equity – adding to your overall wesalth. You can also rent out spare rooms or space in your property to generate additional income, which can help you pay down your mortgage faster. However, when you rent a property, you're at the mercy of your landlord, who can decide to increase the rent or sell the property with little notice.

5. A place of your own.

Owning a home gives you the security and stability of having your own place to live. You don’t have landlords changing their minds about renting the property or neighbors moving in and out. And, it's great to know you're investing in something that will be yours for years to come. Many families also value the importance of holding a home through the generations, allowing for a meaningful legacy and wealth to survive.

Renting does provide flexibility in that you can move to a different property or location if your job or living needs change, but it also means you’ll continually have to pay additional rent. However, with homeownership, you can enjoy the benefits of being a part of a permanent community and take pride in having something truly yours.

Overcoming interest rate and home price anxiety.

Rising mortgage interest rates and home prices have stalled many renters from buying a home. It’s natural to have concerns over costs and want the best rates and prices for your home purchase, especially if you are a first time home buyer.

The truth is, though, that interest rates have fluctuated over the years. They have been going up and down since the 1970s. In the early 1980s, interest rates were high, around 17%. However, since then, they have decreased and stayed relatively low, which has made it easier for people to buy a home. So, while they are not at an all-time low, home buyers should note that today’s rates are still very favorable.

When buying a home, the price is also a major consideration. The sticker shock of current home values can deter some buyers, but understanding that your price will likely pay dividends in the long run, is key. Even with recent price fluctuations, home values have greatly appreciated over time – a benefit for home buyers because their value will likely rise, making it an attractive investment. Considering historical trends, you should not be afraid to invest in a home when financially ready to purchase.

Many buyers see greater value in owning a home than renting, especially as rent costs increase. In fact, renters are often shocked to learn their mortgage payment can be the same or lower than their current monthly rent – a striking realization and decisive factor for many when deciding between owning and renting a home. According to New Jersey Realtors^Ⓡ, home purchases are up in New Jersey, as homes sold faster in the last year than at any time in the last decade; similar trends have been observed in New York and other parts of the country as well.

When considering owning a home versus renting, know the benefits of homeownership may include wealth building, equity appreciation, tax savings, inflation protection, and control over your home. Most importantly, owning a home gives you ownership over your space and affords you the comfort of having your own place. While interest rates and home prices can vary widely, the right plan and preparation can relieve your hesitations. Though renting a home can have its own merits, the wealth benefits of homeownership are certainly hard to ignore.

Doing your research and due diligence is the best way to ensure you're investing in a good home. Seek professional opinions from financial advisors, real estate agents and mortgage advisor professionals who can assist you in finding the right fit for your lifestyle. With the right guidance, you can embark on your journey to owning a home with confidence and peace of mind.

Resources for Home Buying:

• See answers to common mortgage questions.
• It’s a Killer Market - Don’t waste your time at an Open House! | Kearny Bank.
• Reach out to us for personalized help in finding your dream home.