Buying vs. Renting: The Benefits of Homeownership

12/12/2023 5:53:36 PM
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Owning a home provides numerous tangible benefits, from financial stability to emotional well-being. In fact, it can be a significant factor in building generational wealth. Here are some of the benefits of homeownership.

Wealth Creation

New data reinforces that housing is one of the biggest positive drivers of wealth creation. The Federal Reserve Board in December released its Survey of Consumer Finances (SCF) reflecting 2022 results. It shows the median homeowner has 38 times the household wealth of a renter.
Here’s how owning a home helps build generational wealth:
  • The equity in your home will continue to rise as you pay down the principal of your loan.
  • At the same time, the market value of a home typically increases over time.
  • If you pay off your mortgage, you’ll have 100% equity in your home and can pass this wealth on to the next generation.
A study by the U.S. Department of Housing and Urban Development (HUD) finds that wealth accumulation “depends critically on how soon a family that is renting becomes a homeowner” and whether or not a family moves into a more highly-valued home over time.
 

Build Credit

Your credit score is a big piece in determining what loans you qualify for. You need to build credit to qualify for more lending options down the road.
About a third of your credit score can be based on payment history. So, when you have a home loan and consistently make your mortgage payments on time, it proves to lenders that you can afford your home. This can help your credit rating to go up, potentially resulting in more loan approvals in the future.
 

Predictable Payments and Stability

When you rent, lease terms can change and rental prices may fluctuate. Homeownership provides stability. With a fixed-rate mortgage, your monthly principal and interest payment remains constant, allowing for more consistent budgeting and financial planning.
Along with wages that historically rise over time, your mortgage works as a hedge against inflation by providing a long-term fixed debt cost.
 

Tax Benefits

Homeowners often benefit from tax advantages, such as mortgage interest deductions and property tax deductions. These financial incentives can contribute to overall savings and make homeownership more financially appealing.
 

Personalization

It’s your home! Do with it what you like (as long as you abide by government and homeowners association regulations, of course).
Homeownership gives you the freedom to personalize your space according to your preferences. Choose the landscaping, d├ęcor and layout you like, because it’s yours. When you rent, the home doesn’t belong to you, which means you must abide by the landlord’s restrictions.
Having a space that is truly your own can evoke a sense of pride and emotional well-being, knowing you’re in the comfort of your home.
 

Is now a good time to buy?

There’s been a lot of talk about interest rates in recent months. The average 30-year fixed-rate mortgage has decreased throughout November and December. The average Freddie Mac rate as of December 7, 2023 is 7.03%.
Today’s interest rates are actually not unusual when compared to the past several decades, despite what you might have heard. Freddie Mac has been tracking rates since the 1970s, and the average rate spanning more than five decades is 7.74%.
Here’s a look at historical 30-year fixed mortgage rates at the end of the past five decades:
  • 1979: 12.90%
  • 1989: 10%
    Rates peaked at 18.63% in 1981
  • 1999: 8.06%
  • 2009: 5.14%
  • 2019: 3.74%
The bottom line is, rates shouldn’t be the reason you put your dream of homeownership on hold. 2024 could be the year to at least explore your options. That’s where we come in.

Your Helpful Guide

Our mortgage team isn’t just here to be your lender. We truly value helping you navigate the journey of homeownership and find the options that work best for you. Let’s start with a conversation. Contact a lender in your area whenever you’re ready.


First Financial Bank is an Equal Housing Lender.