Benefits of Owning a Home vs Renting: Investing in Yourself

The benefits of owning a home instead of renting offer buyers several tax advantages, the ability to grow equity, and of course a place to call your own. It’s also a feel-good milestone that offers a sense of pride and accomplishment. And, the current real estate and mortgage market conditions have created the perfect opportunity to transition from writing a monthly rent check to investing in your own home.

Check out these ten benefits of owning a home. See why it may be the best financial decision you can make, and learn some key tips on how you can get there affordably.

10 reasons to stop renting and buy a home

Buying a house is better than renting because mortgage payments build equity while rent payments do not, and mortgage interest and property tax deductions can lower the true monthly cost of ownership. American Financing helps buyers compare a projected mortgage payment against their current rent before making the switch.

1. Rents continue to increase

The cost of rent has increased at a very fast rate throughout the country. This trend is only expected to continue. In fact, research from the Urban Institute shows rent in many markets has grown much faster than median incomes. The high cost of rent means that paying a monthly mortgage is often comparable to or even cheaper than renting a home. Don’t believe it? Find out for yourself. Zillow’s Rent vs. Buy Calculator can show you how many years it will take before the cost of buying equals the cost of renting – or, the break-even horizon.

2. Homeownership is a better long-term investment

Renting your home means paying your landlord and having nothing to show for it the next month. Home ownership is a great investment because it’s a method of forced savings. When you buy a home with a 30-year mortgage and make monthly payments, you will own a home to sell at the end. If you rent a property for 30 years, however, you won’t ever get any of your monthly rent payments back.

3. Freedom to personalize and make the space your own

When you rent, you’re bound by your landlord’s rules and lease agreements. Want to paint the walls, remodel the kitchen, upgrade the backyard, or adopt a pet? You usually need permission and the extra money you invest goes toward improving someone else's asset. As a homeowner, you have creative freedom to renovate, decorate, and customize your living space to fit your lifestyle, all while building value in your own property.

4. Down payments can be as little as zero dollars

Sound too good to be true? It's not. There are loan programs and government assistance programs that can get qualified home buyers into a home with a zero dollar down payment. Now, that does not necessarily include closing costs, so keep that in mind. Programs vary by lender and borrowers must meet certain requirements. Yet, if you're looking to buy a home with no down payment, look at a VA loan (for veterans, active duty military, military spouses), a USDA loan, or the Chenoa Fund.

5. Gift money can be used as a down payment

That $25 check from Grandma is always a nice little birthday gift. Now what if Grandma, or any family member, could gift you just a bit more. Something that can add up and be used toward down payment on your own home. Is that even a thing? Believe it or not -- using gift money for down payment is allowed. The amount you’re eligible to receive depends on your loan program. There’s a good chance you may have to come up with your own money to help cover the cost of down payment, but it's a heck of a lot less than you'd need to come up with on your own. 

6. Gain equity as property values continue to rise

Home values have risen and are expected to continue rising in the future, making homeownership a profitable long-term investment. Why does this matter? Because increasing property values mean that the money you spend on your home will provide significant returns in the long run. And, every time you make a mortgage payment, a portion of that payment pays your loan down each month, giving you more equity in the home.

7. Higher loan amounts

Housing inventory recently fell to a two-year low. Even with favorable mortgage rates, a first-time home buyer will likely struggle to find a residence they can afford. However, thanks to higher loan amounts on conforming loan programs, you're able to finance more home.

8. Predictable monthly payments

Tired of your rent rising? Sick of it causing your budget to change? When owning a home, and using a fixed-rate mortgage, that can never happen. You’ll always pay the same amount each month, each year. Plus, there's no risk of a landlord trying to kick you out because he wants to sell the home. Want a better idea of what to expect? Use our simple mortgage monthly payment calculator to estimate your monthly mortgage payment for a new home loan. Enter a home price, your expected down payment, and desired loan term to get an estimated monthly breakdown of payments.

9. Bring in extra income by renting a room

Being a homeowner means you have an opportunity to earn extra income by renting out a room. Maybe you bring in a long-term tenant to rent out your basement, or you look at short-term tenants via renting a room on Airbnb. As a homeowner, everything is completely up to you -- how much you charge, how often you have someone renting from you, etc. There's no landlord to ask permission from or roommate that needs convincing.

10. Tax deductions

Being a homeowner does not have to be just a long-term aspiration. Enjoy short-term savings via annual tax write-offs and mortgage interest payment deductions, along with other deductions depending on each individual’s situation. These deductions often amount to significant savings, and they are of course not available to renters.

Buying vs. renting FAQs

Why is buying a house better than renting? Buying a house is better than renting because mortgage payments build equity while rent payments do not, and mortgage interest and property tax deductions can lower the true monthly cost of ownership.

Is it cheaper to buy a home or rent? Owning a home is often cheaper than renting over time because mortgage payments build equity while rent payments do not, and mortgage interest and property tax deductions can lower the true monthly cost of ownership.

Can I buy a home with no down payment? There are loan programs and government assistance programs that can get qualified home buyers into a home with a zero dollar down payment, such as a VA loan for veterans, active duty military, and military spouses, or a USDA loan.

Do renters get the same tax benefits as homeowners? No. Homeowners can enjoy short-term savings via annual tax write-offs and mortgage interest payment deductions, which are not available to renters.