Deciding whether to rent or buy a home can be challenging, especially in today’s housing market. For many, the decision hinges on long-term benefits, financial stability, and the pride of owning a place to call home. In this video we discuss and highlight a few powerful stories and numbers that underscore the advantages of buying a home over renting.
A Story of Hope: From Renting to Owning
Michele started this weeks market update video (below) with a heartwarming story about a client who had spent her life renting, believing homeownership was out of reach. After a conversation with her son’s lender, she discovered she was eligible for a loan and is now actively shopping for her first home. This story serves as a reminder: even if homeownership feels out of reach, a conversation with a trusted lender could open up possibilities.
The Real Costs: Rent vs. Buy
The core difference between renting and buying boils down to short-term costs versus long-term investment. When purchasing a home, short-term costs include down payments, closing fees, and inspections. The main long-term expense is home maintenance, something that renters generally avoid. While paying for repairs might seem daunting, a well-negotiated purchase can often offset some of these costs. And for many, the pride of ownership, freedom to personalize, and assurance of stable housing far outweigh the maintenance costs. The benefits, however often outweigh these concerns. With a home, you have the freedom to make your space your own without worrying about eviction or landlord restrictions. Owning your home fosters a sense of pride and stability—and it allows you to invest in your future.
The Advantages of Homeownership
Owning a home brings several freedoms that renting cannot. Homeowners don’t have to worry about lease renewals or unexpected moves due to the landlord’s decisions. With homeownership, there’s also an invaluable sense of security, from the ability to decorate without restrictions to the stability of a fixed monthly payment over time. Moreover, ownership comes with a significant financial benefit: building equity. This equity serves as a savings plan, allowing homeowners to borrow against it in times of need. For example, after five years of ownership, a home purchased for $450,000 could appreciate by roughly $90,000—wealth you simply don’t gain as a renter.
A Portland Example: Nine-Year Ownership Breakdown
To make the rent-versus-buy conversation more tangible, we brought in Jason Fleming from Neo Home Loans. Jason compared the costs and benefits of buying versus renting in Portland, based on a typical scenario:
- The Home: A home in Multnomah County priced at $535,000 with an average appreciation rate of 5.65%.
- The Rental Comparison: A comparable rental at around $2,700 per month.
Assuming a 10% down payment and nine years of ownership, the math shows that a homeowner could gain over $300,000 in total value by purchasing instead of renting. Jason breaks down the numbers further:
- Home Appreciation: At an appreciation rate of 5.65%, the home would be worth $342,000 more after nine years.
- Principal Reduction: Over that period, the homeowner would pay off $63,600 of the mortgage, further adding to their equity.
- Cashflow Difference: While owning might cost about $588 more per month, rent increases by 6-9% per year in Portland. Over time, renting could catch up to the cost of buying.
Tax Benefits and Added Value
Higher mortgage rates currently offer an unexpected tax advantage, which renters don’t receive. Plus, after nine years, the added equity, appreciation, and reduced mortgage balance put buyers in a stronger financial position. As Jason explained, it’s a rewarding exercise that often reveals the hidden value in buying over renting, even when the initial costs seem higher.
Use Our Mortgage Calculator
To make this process even easier, we offer a mortgage calculator on our website. This tool allows you to plug in different down payment amounts, closing costs, and interest rates to help determine a budget that works for you. For those curious about their own rent-versus-buy scenario, this calculator can clarify whether you’re ready to make the leap into homeownership.
Is Homeownership Right for You?
While owning a home may not be the right choice for everyone, the advantages of building equity, gaining stability, and generating wealth make it a compelling option for many. And as demonstrated, buying a home often provides long-term financial rewards that renting simply cannot.
If you’re contemplating the benefits of buying versus renting, reach out to a lender or real estate advisor who can walk you through the specifics based on your budget and goals. Owning a home may seem daunting, but with careful planning, it can be an achievable—and rewarding—goal for those ready to take the next step in their financial journey.
Join Michele and Randolf in this weeks Market Update Video, along with Jason Fleming: