1. The first thing to keep in mind: Owning a home is the No. 1 way most Americans build wealth.
The average net worth of a homeowner is much larger than that of a renter, says Alanna McCargo, vice president for housing finance policy at the Urban Institute. In 2016, the average homeowner’s net worth was $231,420; the average net worth of a renter was only $5,200.
“Families have built wealth for generations and financial security over time as a result of their owning a home,” McCargo says — a huge factor to consider as you think about whether you want to rent or own.
2. On the other hand, buying a house is not an automatic ticket to the good life, and it may not make you happier.
If you remove the difference in wealth accumulation from the equation, research hasn’t shown definitively that buying a home makes people happier, says Elizabeth Dunn, a professor of psychology at the University of British Columbia. She studies how time, money and technology shape human happiness.
“You know, if anything, homeowners seem to experience a little bit more pain from their homes,” Dunn says. Renters don’t have to fix the water heater when it breaks, make sure their mailbox matches the other ones in the neighborhood, replace the roof every 15 years.
The expense of owning a home goes well beyond the mortgage payment, says Michelle Singletary, a personal finance author and columnist with The Washington Post.
“I’m still a big believer in home ownership — obviously, I’ve been a homeowner since my second year out of college,” Singletary says. “I just believe that you need to take it slow, understand what it means.”
3. Renting gives you flexibility.
Renters have one definite benefit over owners: It’s a lot easier to pick up and move, whether to escape noisy neighbors or follow a job offer across the country.
Especially when you’re younger, Dunn says, you may be happier having the flexibility to travel and teach English in Thailand and pursue other adventures like that, rather than spend money and time dealing with plumbing problems and leaky roofs.
4. That flexibility comes with a cost: Rent will always go up.
Inflation alone pushes rents up over time — and if the neighborhood gets trendy, rents can go through the roof.
But if you own your home (and you have a fixed-rate mortgage), your monthly payment is a fixed cost. McCargo says that this offers peace of mind. And as inflation rises, living in your home gets effectively cheaper over time.
“Not to mention, every single month, you’re paying something down every time you make that mortgage payment,” says McCargo, thereby building your equity in your home and reducing your debt load.
5. You don’t need a big down payment to own a home.
Home ownership might have a lower price of entry than you think. A 20 percent down payment was once standard, but McCargo says the average today is 5 percent of the total. First-time buyers can find programs that offer mortgages with even lower down payments, and some cities offer grants to help with down payments to encourage people to invest in their communities. A good place to go to find out about such incentives is your state’s housing finance agency.
6. Owning a home can give you a sense of security — and that can be priceless.
Singletary was surprised by the profound sense of both security and accomplishment she felt from buying her own place.
“I had been raised by my grandmother, and the circumstances in which I came to live with her were not great,” she says. “I was thinking, ‘Wow, this is supercool — that this kid who was thrown away and almost ended up in foster care, here she is, at 22. I own my own home.’ It was a great deal of satisfaction and pride that I had done this, against all odds.”