What are the benefits of buying a home versus renting?  

 
As a Real Estate agent with 15 years of experience, I often get asked, which is better, renting or buying a home. I let the numbers do the talking when answering this question. 

Owning a home in 2021 makes much more sense financially and from a lifestyle perspective than renting a home. Below are the top reasons you should buy now instead of rent. 
 
 
Building Equity & Appreciation Benefits 
Homeownership is the equivalent of a forced savings account. You pay your lender every month, but ultimately the cash comes back to you in the form of equity as the market value of your home appreciates over time.  
 
In the last 12 months, the central areas of Birmingham Metro averaged $2068 per month. However, with 5% down and the current mortgage rate of 2.75% you could purchase a home priced at $450,000 for an equivalent monthly note and that would include principal, interest, taxes, and insurance (see the estimate below).  

Now, if you sold the home five years later, in February 2026, your principal balance would be $378,450. That amount would be an equity gain of $72,000 in 5 years, versus $120,000 spent on rent. This does not factor in appreciation if your home grew in value as real estate typically does grow.  

In this scenario, the renters will have lost $120,000 in 5 years, versus homeowners who will have saved $120,000 in their lifetime given the market remains stable. If values go up, not only have you saved, but you have also earned money through homeownership.  

The example above uses a home priced at $450,000, however, there are many houses for sale in the Birmingham area for less. Let us assume you are spending $1200 a month in rent. For approximately the same amount and you are single. You can buy a house that is $275,000 with a down payment of 5% using your own money or gift funds, finance it at the current interest rate of 2.75%. Hey, you are single, why not have a roommate, now your mortgage and escrow payment is cut in half to $600. Save, earn, and appreciate through homeownership. 
 
In another scenario, a newly married new couple is currently paying $1200 in rent. Together they decide to combine their cash and buy a $275,000 house. In five years, February 2026, they owe now $231,000 on that house. Together, they have stashed away $44,000 in equity. Let’s imagine the home appreciates 10% or $27,500. That’s a lot of money! So, they have gained $71,500 instead of losing $72,000 in rent and they have gained much more through homeownership than renting. What a happy home they have made together. 
 
 
Tax Benefits 
As a homeowner, you’ll be entitled to tax benefits. You can deduct your mortgage interest and property tax payments from your federal taxable income. If you live in your house two out of the last 5 years of ownership, you pay no capital gains taxes (Ask your accountant about limits.) There are not many things that you do not have to pay taxes on, but yes, under certain circumstances, profit from selling your home is one of them.  

 
 
Historically Low Interest Rates 
The argument for buying instead of renting only gets stronger with today’s low-interest rates. What may seem like a slight difference in your mortgage rate can make a huge difference in your monthly payment. Interest rates are still competitively low. So, now is a great time to purchase a home and take advantage of low rates. Locking into a low 30-year mortgage rate today could save you hundreds of dollars each month for decades to come. When comparing the benefits of owning vs. renting, you will find that many of the current rental rates are higher than a mortgage payment, and you do not get the advantage of the yearly tax deductions discussed earlier. 
 
 
Stable Payments 
With a fixed-rate mortgage, your monthly principal and interest payment is set for as long as you keep the loan. Sign a rental lease, however, and you could see your rent rise the following year, the year after that, and so on. 
 
 
Improve and Customize Your Home in Any Way You Want 
Owning a house gives you real improvement freedom. There is no landlord who says what you can and cannot do while decorating and improving your house. Renovate your property or completely redesign your bathroom. Paint your kid’s room any color you want, change your floors from carpet to wood and hang a new chandelier in the dining room without asking a landlord for permission. And sometimes, making these home improvements will increase the value of your property. 
 
 
Community Involvement & Pride of Ownership 
Homeownership goes hand-in-hand with voting, volunteering at schools, and general civic roots. If you own a home, you will probably be more likely to put roots down and connect with the people in your community. Renting a place can feel temporary, but ownership often fosters a sense of pride. 
 
 
To recap, if you plan to stay put in your house for more than five years, owning is generally a better deal than renting. You should not be renting unless you have a low credit score, and then you should be doing everything in your power to improve it. The benefits of owning a home instead of renting offer buyers several tax advantages, the ability to grow equity, predictable monthly payments, and of course a place to call your own. It is also a feel-good milestone that offers a sense of pride and accomplishment. And, the current real estate and mortgage market conditions have created the perfect opportunity to transition from writing a monthly rent check to investing in your own home. 
 
*Agent sourcing current rates on Feb 3, 2021. This information is not based on credit scores.