If you are currently renting an apartment or even a house, and have been “on the fence” about whether this is the right time to consider buying your first home, here are five facts that may help you to make a wise decision.
According to a report by Trulia, over the long run, “buying is cheaper than renting in 100 of the largest metro areas by an average of 33.1%.” From a financial perspective, buying a home instead of signing another lease extension offers you a variety of advantages that work in your favor.
In the report, Ralph McLaughlin, Trulia’s Chief Economist explains that owning a home is one of the most common ways households can build long-term wealth.
The report lists 5 reasons why owning a home makes good financial sense:
Mortgage payments can be fixed while rents go up. Fixed rate mortgages give buyers peace of mind that they won’t face any annual, or unexpected increases in their monthly payments.
Equity in your home can be a financial resource later. Increasing your equity now is a powerful tool that can pay future dividends in the form of a strong financial base.
You can build wealth without paying capital gains. As property values rise, your investment grows; without having to sell your home or pay taxes on gains.
A mortgage can act as a forced savings account. Because a traditional mortgage pays down both the principal and interest on your loan, each payment increases your accumulated wealth just like a savings account. Automatic payments can make this kind of saving even easier and avoid the risk of late charges or fees.
Overall, homeowners can enjoy greater wealth growth than renters. Instead of paying your landlord, you can pay yourself in the long run through paying down a mortgage on a house.
Instead of paying your landlord every month, and forgoing the opportunity to build equity, buying your own home can put you on the path of accumulating personal wealth, and achieving the peace of mind that comes with greater control over your housing expenses.