What to Know When Going from Renting to Owning

Owning your own home has long been a key ingredient in the American Dream and for good reason. There are a lot of benefits to owning a home versus renting, but you should be aware of some of the changes you can expect if you’re going from renting to buying a home. There are many benefits to owning instead of renting, but there are also some drawbacks which are important to keep in mind if you find yourself in the position of being a potential buyer. In the paragraphs below, we’ll explore and explain the pros and cons of each.

Building Equity

One of the big benefits of owning your own home, or being on the path to do so, is that you’re building equity. When you pay rent, that money has no chance of coming back to you—it’s simply what you pay for the right to live there and have someone manage the property. When you make house payments, though they are more expensive than rent, you can think of it more as an investment. After all, you are paying toward something that will be yours and a home is typically a good long-term investment. If you should decide to sell down the line, you are likely to recoup the money you invested and then some.

Your Bills Will Get More Expensive

When you’re renting a place to live, some of the bills are generally taken care of for you. For example, water and sewer costs, and if you’re lucky some of the other utilities can be too. This is not the case when you’re buying a home, or you own it. All the bills are at your own expense, and they can add up quickly if they’re not something you’ve worked into your budget.

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Repairs & Maintenance

A key difference when owning a home is that repairs and maintenance are entirely up to you. This can be a positive or a negative, depending on how you look at it. On one hand, it’s nice as a renter to call the landlord or superintendent to handle common issues like broken appliances oar plumbing issues. On the other hand, when you own a home, you make changes and upgrades when things aren’t working properly. Fridge having a problem? Maybe it’s time to invest in that stainless steel double door refrigerator you’ve had your eye on. It can be costly to take care of your own home maintenance, but there’s also a degree of freedom to it if you want to make changes around the home.

Stability

As a renter, you’re almost always in a temporary situation, no matter how long you may stay in one place. Ultimately, things outside your control can dictate whether you have to move or not. Your rent can go up—sometimes annually—or if you rent a home, the owner may decide to sell, and you’ll have to move. Owning a home comes with a lot of stability and allows you to put firm roots down. You can make it all your own, make your own rules and not have to worry about shifting unexpectedly, which is a real benefit if you have kids in school.

Property Taxes

Another financial concern when owning is that you will have to pay yearly property taxes. Property tax is based on your home’s value, which means it can go up if your home is reappraised (say after making improvements) at a higher value, the percentage you pay will result in a higher number. The tax rate itself can also get raised, which means the cost of your property tax will go up even if the valuation remains the same. It’s an important figure to factor into your budget and you should leave yourself some wiggle room for unexpected changes, as it can fluctuate and usually in an upward direction.