Admiral’s Advice: Don’t Rent When You Can Own
Although I am not a financial advisor, I’ve always believed that there are benefits to owning a home that you don’t get from renting another’s property. And with current interest rates hovering near historic lows in recent months,1 you may be asking yourself: Is it time for me to buy a home?
When—and if—to purchase a home is an individual decision. Much depends on your personal finances, your short and long-term goals and the real estate market in your locale. To support a decision to buy, I wish to share with you the following:
Net Worth is Higher for Owners Than Renters
Even with an 18% gain in median net worth from 2016 to 2019, property owners greatly exceed the wealth of their peers who rent their home. The net worth of those who rent is but a fraction of that of owners.2 The reason for this is obvious. When you own your home you have an asset that can become a major part of your net worth. Even with a mortgage, your home can appreciate over time. In fact, home ownership is a major contributor to how most Americans build wealth.3
Build Your Financial Equity Instead of Your Landlord’s
Each monthly rental payment assists your landlord to pay bills, update the property and deposit your money in their bank. Wouldn’t you rather do the same for yourself? Additionally, you run the risk that your rent may be increased at the landlord’s discretion or your landlord may have reasons not to renew your lease.
Enjoy Pride of Home Ownership
It has been said that home ownership gives one a sense of accomplishment and pride. From my experience this is especially true for members of our military who may have lived in base housing or rentals in the local market. Owning your own home is a great feeling and it also provides a meaningful asset to share with your spouse and family. You and your spouse make the decisions on how to furnish, decorate, and maintain “your” home; it’s all yours!
Buy with No Money Down
Another important financial reason I believe Veterans and military families should choose buying over renting is based on the valuable financial benefit earned by the member’s service. A VA home loan allows the Veteran to buy a home with no money down and no private mortgage insurance. This is a significant benefit that helped me many times during my career. It’s a way for our fellow Americans to say thank you for your service.
Interest Rates Are near Historic Lows
It’s hard to imagine today, but I remember a change of duty station from Norfolk to the Pentagon in 1981. I felt fortunate to use my VA home loan benefit to purchase our home with a 21% mortgage interest rate! Today, interest rates are near all-time lows.1/4 I firmly believe if you can afford to lock in a home loan mortgage at these low rates, it will be to your financial advantage to do so.
1 https://www.bankrate.com/mortgages/analysis/
2 https://www.federalreserve.gov/publications/files/scf20.pdf
3 https://www.census.gov/library/stories/2019/08/gaps-in-wealth-americans-by-household-type.html
4 http://www.freddiemac.com/pmms/pmms30.html