What are the financial advantages of renting vs. buying?

Renting may be a smart financial move for these reasons:

• You probably won’t pay property taxes and upkeep directly, though your rent may reflect these expenses.
• With no money tied up in real estate, you should have more cash or savings to invest, producing more growth in value than owning real estate.
• You don’t have to worry about the value of your property declining.
• You’ll have more mobility to take advantage of job opportunities in different areas.
• You won’t need to pay closing costs, real estate agent fees, or homeowner’s insurance (but you might still need to pay renter’s insurance).

Buying a home has its advantages as well:

• You might be able to deduct* the interest on your mortgage and your local property taxes on your tax return, which can reduce the amount you have to pay (or increase your refund).
• You build equity as you pay off your mortgage, increasing your share of the property’s value.
• You may be able to borrow against your equity and deduct* the interest payments on the loan.
• Your house may appreciate in value over time.
• You’ll build up your credit score

*You should consult a tax advisor on the tax deductibility of your home mortgage or equity loan, and whether it’s a good idea for your finances

Owning a house is a life goal for many people, for good reason! In addition to the financial advantages, it can benefit you emotionally and psychologically to have a place of your own to call home.

You can use our rent vs. buy calculator to work out specific numbers for your situation.

Are “starter/beginner homes” still a thing?

Houses are much harder for the average millennial to attain today than they were for their parents’ generation, which gives some people pause when considering whether buying a “starter home” makes sense. If you have to save for years to afford a down payment on a home, should you prioritize a place where you can stay for the long term, or find your financial footing with a home you intend to sell in a few years?

The answer will depend on your individual financial circumstances. However, for most people, trying to find a house to stay in for the long term might be less attainable than finding a place that you’re comfortable with for now. You can always sell your house down the road.

So, yes, starter homes are still a thing!

Can I afford a house?

Luckily, this is the right time to ask that question. Interest rates on home mortgages are historically low, which means you’ll pay less over time for the price of a house. But if you don’t have a solid financial foundation to draw on, you might not be able to put forward the down payment required for most homes – or not willing to accept the terms that come with arranging a mortgage with 100% financing, which doesn’t require a down payment.

Traditionally, the down payment for a mortgage has been between 10 and 20% of the sale price, though there are some government-sponsored programs that let you put a smaller amount down. But the less you put down, the larger your mortgage payments will be. The smaller the down payment, the greater the overall cost of a home loan.

Among the reasons for renting rather than buying a home is that you're not making a long-term financial commitment to a mortgage. It’s important to look at your total financial wellness picture and ask yourself if you can regularly spend money on a mortgage, maintenance, and associated upkeep that goes into owning a house.

Sometimes you can achieve a better interest rate applying to a bank or credit union where you already have a relationship. On most home purchases, that can add up to thousands of dollars off of your mortgage payments over time!

Want to crunch your numbers? We have several financial calculators that can help you determine whether buying a home is attainable for you.

Are you ready?

Buying a house is one of the most important decisions you’ll make in life, and it’s ok to question whether the time is right for you. If decide you want to start your home ownership journey, our mortgage lenders can help. They’ll work with you every step of the way to get you in your starter or dream home, all with the dedicated service and personal touch you expect from Hills Bank.