5 benefits to homeownership that can still make buying worth it
Although renting may be a good option in some situations, many people still aspire to be homeowners. Here are several homeownership benefits to consider that may make buying a more appealing choice in some cases.
10/18/2022 · 3 min read
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Home equity may be used to obtain an equity-backed loan.
Your home may increase in value over time.
As a renter, you may not be able to make changes to a home.
In some places, your monthly mortgage may be cheaper than paying rent.
1. Building home equity
Equity is the amount of your home that you own less the remaining balance on your mortgage. The amount of equity you have in your home may come from your down payment, your monthly mortgage payments, and home appreciation. If you ever decide to sell your home, the equity can be used to purchase another home or something else.
Some homeowners take advantage of special loans that are backed with the equity in their homes—such as home equity loans and home equity lines of credit (HELOCs). These loans may have interest rates that are lower than other borrowing options, like personal loans. Homeowners can then use their home equity to renovate their homes, purchase big items, consolidate debt, and other things.
2. Home appreciation
Although there are some situations where the value of a home may decrease, home values typically increase over time. If you buy a home and live in it for several years before moving, you may be able to sell it for more than what you bought it for.
3. Freedom to make modifications
If you don’t like the carpet or the color of the walls in a home you are renting, you may have to seek permission from your landlord to change them. As a homeowner, you can usually make changes to your home as long as they conform to local building codes and regulations.
An important exception to consider is that there may be limitations on what you can change if your home is part of a homeowners association (HOA). An HOA may allow homeowners to make changes to the interior of their homes, for example, while exterior changes may require the association’s approval.
4. It may be cheaper than renting
Depending on where you live, buying a home may be cheaper than renting. According to data from 2021, monthly mortgage payments on starter homes tend to be cheaper than renting in metro areas around the midwest and south. Mortgage payments will vary considerably, however, depending on the size of the loan, the loan term, the down payment, and other factors.
Another important benefit of homeownership to consider is that you don’t have to worry about rent increases. If you have a fixed-rate mortgage, your monthly payments will remain the same each month until your loan is repaid, you sell your home, or you refinance.
5. Paying off your mortgage
If you stay in a home long enough, you may eventually pay off your mortgage and own your home free and clear. You can then take the money you were spending on your mortgage payments each month and save it, invest it, or use it for something else.
Paying off your mortgage before you retire may also give you a place to live during your golden years. This is an important consideration since many retirees’ incomes may be less than what they were while they were working.
This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.
Cyrus Vanover is a finance and real estate writer who specializes in making complex topics easy to understand. He is also the author of "Earn a Debt-Free College Degree." Based in the mountains of Virginia, he enjoys hiking the local trails, listening to 80s music, and reading books on military history in his spare time.
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