Buying vs. renting a home is always debatable, regardless of current economic circumstances. Most experts will recommend purchasing, if financially feasible, to establish equity in the property. But with inflation rising and the threat of a recession on the horizon, is this advice still sound? As one of the top 3 title and settlement agencies in the DC Metro region, Champion Title reviews some of the factors to be examined when considering the purchase of a home in the context of today’s economic environment.
Potential to build wealth. A major benefit to purchasing a home is the potential for this asset to increase in value as an investment. Provided real estate values will rise during the time you plan to own the home, you will make a profit on the future sale. In contrast, there is no benefit of a rise in asset value when renting. Of course as with any type of investment, we cannot predict the future and there is a risk that home values might decline instead. Consider how long you plan to stay in the home before selling when assessing future home value trends.
Lowered future cost of living. For most who choose to finance the purchase of a home, their ultimate goal is to pay off the mortgage and own the house outright. By doing so, hefty monthly house payments are eliminated, at a time when many are retiring and looking to reduce their outgoing cash flow. This is not an option if renting.
Emotional ties to the home and community can be established. As a homeowner, you have the ability to make the house truly your own by making any design changes you choose without landlord approval, knowing you will be the one to enjoy them. And as most who purchase a home intend to stay a while, you can become more involved in the neighborhood and establish meaningful relationships in your surrounding community.
Purchasing a home can help protect your housing expense from inflation. When financing a home purchase, you are able to lock in a monthly payment that won’t change for the next 5+ years depending on the type of mortgage you choose, regardless of increasing inflation. Rents, on the other hand, are already higher and will likely go up in the relatively near future, as they are often set on a 1 or 2 year lease. Given the current state of inflation, probability is high that landlords will increase rent with each lease renewal to counter their own increased costs due to higher prices across the board.
There is no doubt the decision to purchase a home is an important and personal one. Many factors must be evaluated and the preceding are just a few to be considered. If you have come to the conclusion that owning your own home is right for you, give us a call at Champion Title and we will make sure your settlement is as smooth as possible! For more information visit our website at www.championtitle.com or call us with questions at (703) 444-4100.