Buying Versus Renting in 2022
What are the advantages of homeownership versus renting?
Both options are focused on providing you with a place to live. However, in a rent versus buy study by the listing site Trulia, on a nationwide basis, homeownership was shown to be 35 percent cheaper than renting, over a period of time. A general rule of thumb is if you stay in your house for more than five years, owning is a better deal than renting.
According to Money Geek, a site dedicated to personal finance,
“Conventional wisdom holds that owning a home is wiser than renting over the long haul. Perhaps the most important factor in the rent vs. buy calculation is the length of time you plan to stay in one place. The deeper your roots, the more logical it is to own your home. But other factors come into play: The economic health of your hometown or state, your financial discipline and your aptitude at home improvement projects, to name a few.”
Advantages of home ownership include:
* Stable housing payments
With a fixed-rate mortgage, your monthly payment will be a predictable amount and not at the whim of a landlord.
* Building Equity
A mortgage is a forced savings account, one that requires you to essentially pay yourself every month.
* Tax Break
Mortgage interest and property taxes no longer are tax deductible. But when you sell your primary residence, you can avoid capital gains tax on a profit of $250,000 (or $500,000 for married couples).
Sowell agent Stephanie Taylor explains why NOW is a good time to buy a home.
“What I'm seeing is that rental prices are rising alongside sales prices. The only way to stop the climb is to buy and your mortgage becomes fixed. Taxes will rise and fall with the economy (mostly rise of course), but you regain a sense of control as the owner. If needed, you can refinance to offset rises in taxes/insurance. And, of course, if the rates should fall in the future, you can take advantage of that as well.”
However, since the Federal Open Market Committee (FOMC), a committee within the Federal Reserve System, has announced that it expects to raise interest rates at each of its remaining six meetings this year, the sooner you can lock in a rate, the better. We have been enjoying historically low interest rates, so this is simply a market correction. But the lower interest rates have been giving people more buying power, allowing more first-time buyers to enter the housing market, as well as current homeowners to “move up” and purchase more expensive homes, increasing their investments.
Other advantages of homeownership include being able to customize your space and homeownership tends to foster a sense of pride. Additionally, homeowners are more likely to connect with their communities, since they are likely to be less transient.