In financial circles, the “rent versus buy” argument is bigger than “paper versus plastic” or “Apple versus PC.” Owning a house is like passing some special, invisible barrier into actual adulthood. It’s permanent, it reeks of fiscal responsibility, and it makes us feel a little bit more like functional adults. And despite the economy, it’s good financial sense too. It’s a big decision, so it’s understandable to be wary of leaping into a commitment that large. Here are just a few reasons why it makes better financial sense to buy outright than rent for the rest of your life.
Mortgage Rates Are Cheap
During the recession, the rate on home loans dropped low – like, super low. On average for a thirty year fixed rate loan you were looking at about 4%, and now that the economy is in recover the rates haven’t risen very high. It won’t last forever though, making now a great time to buy. Once the rates go up, you’re already locked in at a low mortgage rate, meaning that when you finally do sell you’re looking at making a tidy profit.
Home Prices Are Affordable
Home costs vary greatly depending on what state you live in, what city you live in, and what neighborhood within that city you live in, but housing rates are still lower than their 2007 peak. Homes aren’t at their cheapest, but prices are on the rise. In the last year housing prices have gone up 7%, so by next year we may be looking at surpassing those 2007 prices. According to a Zillow analysis, at the end of the second quarter of this fiscal year the average American home buyer spent only 15% of their incomes on their mortgage. Can you imagine if your rent was only 15% of your income every year? That leaves you a pretty penny to put towards savings, retirement, or whatever else your heart desires.
Buying Is Still Cheaper Than Renting
If that 15% above wasn’t enough to convince you, how about the fact that rental prices are on the rise? If you’ve been renting for any period of time you’re well familiar with the idea that when it comes time to renew your contract there’s a good chance that your landlord may up your rent. Have you ever heard of them lowering it in the coming year? That happens with mortgage rates as they bend to the ebb and flow of the market, but as demands for rented spaces are rising, landlords can afford to keep prices high. Another survey by Trulia also determined that it’s ultimately cheaper to buy than rent in most areas. Why has a lot to do with the demand and available space in your area. For example, in Houston it’s between 40-60% cheaper to rent because of the amount of land they have to expand on, the relatively low cost of living and low mortgage rates available in the area. New York City on the other hand is one of the few areas to rank in at an almost 0% difference between renting and selling because the demand for space and the cost of living are both so high there. It’s worth noting that no areas on their study determined that it was cheaper to rent than buy.
You’ll Have A Place To Call Your Own
With the numerous financial benefits to owning a home, one of the best reasons of all is still having a place to call your own. You can customize it to suit your needs, no worries about having to paint the walls back if you want to give it some color. Hate carpet? You can pull it out and lay down some hardwood, or tear down a wall to let in a little more light. The options are endless, and when you own rather than rent, they’re all yours.