Owning A Home Always Better Than Renting

Owning a home has great financial benefits.

In a recent research paper, Homeownership and the American Dream Laurie S. Goodman and Christopher Mayer of the Urban Land Institute explained:

 
“Homeownership appears to help borrowers accumulate housing and nonhousing wealth in a variety of ways, with tax advantages, greater financial flexibility due to secured borrowing, built-in ‘default’ savings with mortgage amortization and nominally fixed payments, and the potential to lower home maintenance costs through sweat equity.”

Let’s breakdown 5 major financial benefits of homeownership:

1. Housing is typically the one leveraged investment available

Homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. A 20% down payment results in a leverage factor of five, meaning every percentage point rise in the value of your home is a 5% return on your equity. If you put down 10%, your leverage factor is 10.

Example: Let’s assume you purchased a $300,000 home and put down $60,000 (20%). If the house appreciates by $30,000, that is only a 10% increase in value but a 50% increase in equity.

 
2. You’re paying for housing whether you own or rent

Some argue that renting eliminates the cost of property taxes and home repairs. Every potential renter must realize that all the expenses the landlord incurs (property taxes, repairs, insurance, etc.) are baked into the rent payment already – along with a profit margin!!

3. Owning is usually a form of “forced savings”

Studies have shown that homeowners have a net worth that is 44X greater than that of a renter. As a matter of fact, it was recently estimated that a family buying an average priced home this past January could build more than $42,000 in family wealth over the next five years.

4. Owning is a hedge against inflation

House values and rents tend to go up at or higher than the rate of inflation. When you own, your home’s value will protect you from that inflation.

5. There are still substantial tax benefits to owning

We know that the new tax reform bill puts limits on some deductions on certain homes. However, in the research paper referenced above, the authors explain:

“…the mortgage interest deduction is not the main source of these gains; even if it were removed, homeowners would continue to benefit from a lack of taxation of imputed rent and capital gains.”

The Bottom Line

From a financial standpoint, owning a home has always been and will always be better than renting.

 

Affordable Central Florida Homes For Sale

703 SANTA CRUZ LANE #13HOWEY IN THE HILLSFL34737
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703 SANTA CRUZ LANE #13

HOWEY IN THE HILLS, FL 34737

$195,500

Beds: 3, Baths: 2, SqFt: 1432, Status: Active, Property Type: Residential
158 QUAIL OAKS CIRCLEGROVELANDFL34736
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158 QUAIL OAKS CIRCLE

GROVELAND, FL 34736

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Beds: 3, Baths: 2, SqFt: 1350, Status: Active, Property Type: Residential
29116 ARMOYAN BOULEVARDLEESBURGFL34748
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29116 ARMOYAN BOULEVARD

LEESBURG, FL 34748

$247,208

Beds: 3, Baths: 2, SqFt: 1796, Status: Active, Property Type: Residential
37347 TURNER DRIVEUMATILLAFL32784
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37347 TURNER DRIVE

UMATILLA, FL 32784

$194,900

Beds: 3, Baths: 2, SqFt: 1518, Status: Active, Property Type: Residential
29424 CASPIAN STREETLEESBURGFL34748
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29424 CASPIAN STREET

LEESBURG, FL 34748

$255,840

Beds: 4, Baths: 2, SqFt: 1687, Status: Active, Property Type: Residential
3569 FORSTER AVENUELEESBURGFL34748
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3569 FORSTER AVENUE

LEESBURG, FL 34748

$224,990

Beds: 3, Baths: 2, SqFt: 1504, Status: Active, Property Type: Residential
3676 CASPIAN STREETLEESBURGFL34748
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3676 CASPIAN STREET

LEESBURG, FL 34748

$224,990

Beds: 3, Baths: 2, SqFt: 1504, Status: Active, Property Type: Residential
17409 PROMENADE DRIVECLERMONTFL34711
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17409 PROMENADE DRIVE

CLERMONT, FL 34711

$259,000

Beds: 4, Baths: 4, SqFt: 2048, Status: Active, Property Type: Residential
3748 QUAINT LANECLERMONTFL34711
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3748 QUAINT LANE

CLERMONT, FL 34711

$274,998

Beds: 3, Baths: 2, SqFt: 1677, Status: Active, Property Type: Residential
5901 PRINCE PHILIP COURTLEESBURGFL34748
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5901 PRINCE PHILIP COURT

LEESBURG, FL 34748

$255,000

Beds: 3, Baths: 2, SqFt: 2215, Status: Active, Property Type: Residential
1121 W BOONE COURTLADY LAKEFL32159
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1121 W BOONE COURT

LADY LAKE, FL 32159

$199,000

Beds: 2, Baths: 2, SqFt: 1352, Status: Active, Property Type: Residential
5107 RIVER EDGE LANELEESBURGFL34748
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5107 RIVER EDGE LANE

LEESBURG, FL 34748

$250,000

Beds: 3, Baths: 3, SqFt: 1950, Status: Active, Property Type: Residential