A growing theme in today’s society is that of renting homes rather than owning them. Though this seems like the more inexpensive option for someone seeking a place to live, renting a home actually has a considerable financial cost.
As a renter, you run the risk of being hit by a higher monthly rent from missing out on low mortgage rates. From a broader perspective, this anomaly could aggravate the already lopsided levels of inequality in our society. Minorities and younger individuals are plagued by rising rents, student debt, and other financial burdens which could prevent them from ever becoming homeowners. The longer you rent your home, the more likely you are to experience higher costs.
Another downside to renting is the inability to build equity. When you pay rent, every dollar you put towards that is gone forever. Standard lease agreements prohibit you from building equity, thus denying you actual ownership. If you plan on moving into a new home after renting your previous one, the only money you may have to contribute to this new cost could be the security deposit given back to you by your past landlord.
Homeownership can help you build wealth over time. Even before buying your first home, saving for a down payment instills the notion of putting money aside for larger costs. This pattern continues by paying your mortgage in monthly increments. Tax benefits are another luxury that comes with owning a home, which cannot be taken advantage of by renters. Through mortgage-interest deduction, homeowners can deduct the annual interest paid on a mortgage along with property taxes. This allows them to reap the reward of having substantial gains exempted from capital gains upon selling their home; yet another plus to owning rather than renting.
It is important to know when the best time to own a home is considering every possible factor within your life. For instance, a married couple in their 30’s would be better be suited to own a home rather than a college student in his or her 20’s. In some cases, it is better to rent than to own. However, those planning on becoming homeowners in the future should begin planning now. In the long run, renting becomes a financial burden on those seeking to buy their first home, and could hinder the process entirely.