Why is owning better than renting property? There are pros and cons to both renting and owning the property you live in. In this post we are going to focus more on the benefits of owning the property. I have a post about the benefits of renting, you can read it here.
Why is owning a property better than renting property?
There are many reasons, I will list them below and explain each one later in this post.
- Your wealth will increase with every mortgage payment
- You can renovate as you wish
- No accountability to your landlord
- No fear of rising rent
- Tax benefits
- Property values can rise
Let’s dive deeper into these topics.
1. Your wealth will increase with every mortgage payment
First on the list is that your overall wealth will increase on every mortgage payment. From the monthly payments, the majority is going towards creating your own wealth and depending on the interest you have on your loan, part is going to cover interest as well. Your monthly contributions towards your accommodation are no longer going into your landlords’ pockets, but into your own.
Owning your own house will very passively build your long-term wealth, and the mortgage payments will get smaller every month. After you have paid for your house partially or totally, you can use that as a deposit towards either a new house or rental property.
2. You can renovate as you wish
If you wish to renovate your apartment, it is always easier to do so if you own it. There can be limits if you live in a block of flats, but even if that is the case, the renovating process will be much easier than when living in a rented apartment.
You don’t have to ask first permission from your landlord and then see if it is allowed. Renovating can also increase the value of the house, so all this money is going to your pocket as well, instead of your landlords.
If you live in a detached house, the opportunities to renovate are close to limitless. You might have to apply for a permit to do certain renovations. If you happen to wake up in the morning, feeling like painting your house neon green, if there are no restrictions in your neighborhood, go ahead. No need to ask permissions unless there are limitations.
3. No accountability for your landlord
Let’s imagine you have a dog. You will always have to think about what happens if the dog happens to destroy something in the house you are renting. If you owned that yourself, you didn’t have to think about what your landlord would say about that, it’s just your personal problem when you are the owner.
You can keep your own properties in the quality you want. If you are fine with your dog running inside the house and don’t mind little nail marks on the floor, it’s just up to you.
On the other hand, all the maintenance you put to the house, are keeping your up your property value. If you see that something needs new paint, you can just paint that. No need to ask for your landlord to get someone to do that job.
4. No fear of rising rent
When you own the property, you live in, you don’t have to think about if your landlord will raise the rent. However, rising interest rates can be a concern. A good way to defend yourself against this is by adding an interest rate cap to your loan, or something else that protects you if interest rates rise. There is no such possibility for rising rent.
Usually, mortgages are with long payment times. The time can be even longer than you have been alive. So even if the interest rate cap does cost some extra, it might be good insurance if interest rates happen to rise. It can keep you sleeping a little bit better every night, knowing that even if interest rises, you are safe.
5. Tax benefits
Tax benefits for homeowners can vary depending on where you live. I won’t go deeper on this topic; you can see your local tax guides on what benefits you will get if you buy or already own your own home. This is here just so you know there could be some.
6. Property values can rise
If you happened to buy an apartment from a good place twenty years ago, that investment could have had a nice return already. On top of that, if you rented it out the whole time, you could have seen some really nice returns. There are other factors than can rise the property values too.
One of these being inflation. When you own your own home, you have some protection against inflation, since your money is tied to that house. Even if inflation rises, your mortgage payments would stay about the same, if you had taken an interest rate cap for your loan. Even if inflation doesn’t really increase the value of your home, it keeps its value better than cash.
Final words
There are benefits on both owning and renting your home. This post was more about the benefits of owning. I have a post about the benefits of renting as well. You can read it here if interested.
These benefits of owning can vary in different countries, as well as in different cities and even different parts of the city. There can be more benefits of owning as well. This was just my quick take on the benefits you get if you own your own home.
This is not investing or financial advice. Always do your own research before risking your hard-earned money.