Owning a Home is Better than Renting. Here’s Why.

If you use smart tactics and exercise some discipline, purchasing a home can still be one of your best financial decisions.

Owning your own home has been the foundation of the American Dream for generations. But as Millennials struggle with heavy debt loads, underemployment and high costs of living, many are beginning to ask if home ownership is even possible. And even if it is possible to buy a house, is owning a home better than renting?

There are plenty of downsides to owning a home. It can be expensive. You have to pay interest on your mortgage and make inevitable repairs to your property. And the tax savings that come from mortgage interest payments don’t make up for those expenses. But does that mean that owning a home is no longer better than renting?

Not by a long shot. There are certain times in life when you shouldn’t buy a home (like when you’re in debt, short on cash or in unstable life circumstances). But home ownership is still the best financial option for most families today.

Here are five reasons why owning a home is better than renting.

1) Owning a home locks in your housing costs.

When you buy a home with a fixed-rate mortgage, you lock in the cost of housing your family . The combined amount of principle and interest on your very last house payment will be the same as the total on your very first. You can count on your housing costs staying the same, even as inflation causes the cost of everything else in your life to go up.

When you rent, though, you have none of this protection. As inflation drives up the cost of living, it also drives up the cost of rents. The amount of money that you have to pay for your apartment or townhouse 10 years from now will be a lot more than you have to pay for the same space now. When you rent, your housing costs vary with market forces. You’re likely to spend a lot more money over the course of your life by renting than owning a similar property.

2) Homeowners eventually eliminate housing payments.

When you buy a home, you’ll eventually pay it off. Though it can take a long time (15 years if you’re wise, 30 years if you’re not), there will be a day when you’ve made your final house payment. You’ll own the property free and clear.

When that happens, you will have lowered the housing cost in your life to effectively zero. Because housing is one of the largest expenses in any family budget, eliminating your monthly housing payments is a huge benefit. But it’s a benefit that renters never get. Renting only buys you housing for a month at a time, so you’ll never reach the point where you don’t have to write that monthly check.

3) Homes appreciate in value.

In a normal real estate market, homes go up in value over time. Because of this, most people can expect to sell their homes for more than they paid for them, which means that they make some money on their transactions.

This appreciation of home values isn’t always a sure thing, of course. And it doesn’t make it a good idea to buy a home you can’t afford. But although ownership does cost you some money in interest payments and repair costs, a fair amount of that money comes back to you in the form of appreciation when you sell the home.

Renters, on the other hand, don’t benefit at all from housing values going up. Over the course of your life, owning a home is better than renting, sometimes to the tune of hundreds of thousands of dollars.

4) Homeowners build equity and wealth.

Each time you make a monthly mortgage payment, a lot of your cash goes to pay the interest on your loan. But a chunk of that money goes toward the principle of your loan, adding to the amount of equity you have in the home. This makes your house a type of savings vehicle. When you pay principle on your loan, you’re essentially depositing money into your house. Though you don’t have access to that money now, you will get it back when you sell the house.

Homeowners build equity in their houses with every mortgage payment they make. Over the course of a lifetime, that equity turns into significant wealth. Renters, on the other hand, get no equity out of their transactions. At the end of a long life of renting, a renter has accumulated no wealth through housing.

5)  Homeowners control their housing futures.

Not all of the reasons why owning a home is better than renting are financial. Some of the benefits are intangible. But that doesn’t mean they’re insignificant.

One of the biggest benefits is in the nature of ownership itself. When you own something, you control it. You make decisions about it, and you can’t be bossed around by others.

Homeowners can stay in their houses as long as they want. They can have pets if they want. They can share their homes with 12 other people or live their whole lives independently. But renters always have to play by someone else’s rules.

Renters have no long-term security about where they live. A property you love renting could be sold tomorrow. If that happens, the new owner may throw you out once your lease expires or jack the payments up to where you can’t afford them. When you rent, you live at the mercy of other people’s decisions.

As you can see, there are a ton of benefits that come from owning a home. If you’re not ready to make the commitment of buying a house, that’s okay. But if you’re out of debt, have some savings in place and enjoy some stability in your life, owning a home is better then renting nearly all the time.