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You are here: Home / Blog / Tips for Home Buyers

5 financial benefits to owning your home instead of renting

January 3, 2020

Owning will always be better than renting

Owning a home has great financial benefits.

In a recent research paper titled “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 non-housing 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 break down five 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 not 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 repair. 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 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 $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 here, 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 captial gains.”

Bottom Line

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

Filed Under: Tips for Home Buyers, Home Ownership Tagged With: Home Equity, Rent vs. Own

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Russ Fortuno, Associate Broker

I'm a Southern Arizona native and year-round Green Valley resident. Whether you’re buying or selling a home in the Green Valley or Sahuarita area, you’ll experience unsurpassed service and professionalism at all stages of your real estate transaction. I welcome the opportunity to assist in your next home sale or purchase.
Meet Russ

Tierra Antigua Realty

18745 S. I-19 Frontage Rd., Ste. A105
Green Valley, AZ 85614
(520) 333-0446
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