Owning vs. Renting: Why Buying Might Be Your Smartest Move

Even though mortgage rates are on the rise, there are still many reasons why buying a home can be a smart investment.

Here are two of the biggest reasons:

1. Homeownership Can Build Wealth Over Time

Historically, home prices have risen steadily over the long term. This can be seen in the graph below, which shows the average sales price of houses sold in the United States since 1963 according to data from the Federal Reserve. There have been exceptions, of course, such as the housing crash of 2008. However, home prices typically rebound after a downturn.

When you buy a home, you are building equity with every mortgage payment you make. Equity is the difference between the fair market value of your home and the amount you still owe on your mortgage. As home prices go up, so does your equity. This equity can be a valuable source of wealth that you can tap into later in life, for example, by selling your home or taking out a home equity loan.

2. Rent Prices Are Also on the Rise

Renting can seem like a more affordable option in the short term, but rent prices also tend to rise over time. According to the data from iProperty Management, rents have been rising steadily for the past few decades.

When you buy a home with a fixed-rate mortgage, your monthly housing payment will stay the same for the life of the loan (unless you choose to refinance). This can help you to budget more easily and avoid the uncertainty of rising rents.

Buying a Home Is a Big Decision

Buying a home is a big decision that should not be taken lightly. It is important to carefully consider your financial situation and your long-term goals. If you are financially stable and plan to stay in one place for a long time, then buying a home can be a great way to build wealth and stability.

Here are some additional things to consider before buying a home:

  • The down payment: You will typically need to come up with a down payment of 3.5% to 20% of the purchase price of the home.
  • Closing costs: Closing costs can add up to thousands of dollars. Be sure to factor these costs into your budget.
  • Maintenance costs: Owning a home comes with the responsibility of paying for maintenance and repairs.
If you are thinking about buying a home, it is a good idea to talk to a local real estate agent. I can help you understand the buying process and find a home that meets your needs and budget.

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