Renting vs. Buying a Home in 2022

If you’re deciding whether to rent or buy a home in 2022, this quick list of pros and cons can help. Whether you’re a current homeowner, a long-term renter, or somewhere in between, you’re not alone. People from every corner of the country are weighing the pros and cons of renting vs. buying a home in 2022.

Mortgage rates are ticking upwards, but experts remain cautious on setting predictions in the face of so many economic uncertainties. To find out just how inflation affects mortgage rates, check out last week’s perspective on inflation which we blogged about here.

What’s more, pandemic exhaustion makes the decision a bit more difficult. Two years ago, renting somewhere new and working remote seemed like an adventure. Today, many families are seeking stability and balance. In an era where everything is changing, many are choosing options that promise a sense of stability.

If you’re deciding whether to rent or buy a home in 2022, these pros and cons are written with you in mind.

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Renting vs. Buying in 2022

Pros of Buying a Home

1. Buying a home can help build stability with a steady mortgage.

With a 30-year fixed-rate mortgage, you can lock in your rate for the life of the loan and count on a fixed payment. No matter what happens in the economy, you can be certain that your mortgage payment will be steady and consistent. No surprises. No extra fees. No hidden increases.

Renting provides stability only for as long as your lease agreement, often 1-3 years. Unless you live in a rent-controlled area, rent can increase with little notice and you’ll be subject to market rates.

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2. Buying a home creates the opportunity to build equity.

Home equity is the difference between your mortgage balance and the current market value of your home. For example, if you put 20% down on your home, you’ve already got 20% equity. Every time you make a mortgage payment, a portion goes to pay down your mortgage balance. 

In many areas, home values increase faster than inflation. This means your home value (and your equity) will increase simply by paying your monthly mortgage payment on time.

As your equity builds, you’ll have opportunities to borrow against that equity and invest elsewhere or refinance your mortgage to secure a lower monthly payment.

On the other hand, renting offers no return on your monthly payment. When you pay rent, your landlord benefits from the property value and home equity. Your rent payment simply exits your account with nothing in return (except a solid roof over your head).

Use this MORTGAGE CALCULATOR to find out how much you can afford right now

3. Buying a home in 2022 brings tax advantages.

When you buy a home, mortgage interest and property taxes are tax-deductible in most states across the country. Homeowners also benefit from tax advantages on any profits when you sell your home in most circumstances. Check with your tax accountant to verify the tax laws in your state and confirm your savings.

Find a qualified mortgage expert in your local area

Renting vs. Buying: Pros of Renting in 2022

1. Renting offers flexibility to move whenever your want.

If planting roots and establishing yourself sounds limiting or restricting, renting in 2022 might be a good option. Most properties offer month-to-month leases as well as 1-3 year leases for a new tenant. 

If you’re job hunting or want to try out different parts of the country before you settle down, renting is a good way to put down temporary roots and see what life in that city feels like. If you decide at any point to move closer to family or even change jobs, renting gives the freedom to pack up and go.

2. Renting has fewer maintenance costs.

Maintenance for most properties is the responsibility of the landlord. For example, if the water heater goes out, you can call and have them take care of it. Rentals are typically maintained through a property management company, an onsite property manager, or directly by the landlord.

3. Renters don’t pay property taxes or HOA fees.

Your rent payment is typically the full monthly cost with no additional fees or taxes. (Utilities, water, and garbage are typically separate but may be included depending on your lease.)

When you rent, the property owner is responsible for paying the property taxes, mortgage interest, HOA fees and homeowner’s insurance. Some people carry renter’s insurance, but it is substantially less expensive than homeowner’s insurance.

Related: Check out the best custom loan options for 2022

Cons of Renting in 2022

One of the difficult things about renting is the instability of the market. For example, you may sign a 1-2 year lease when you become a new tenant. But when that lease gets renewed, your rent can increase substantially.

If for some reason you can’t afford the increase, you’ll be forced to find a new place at current market rates. The property owner can also decide to sell the property or simply stop renting the property altogether.

Finally, as a renter, your monthly payment goes directly to your landlord instead of paying down your mortgage and building equity in your home. There are also few or no tax benefits for renters in most states.

RELATED: Talk with a local mortgage expert to find out if you qualify for first-time homebuyers advantages

Summary

2022 has all of us looking at the housing market a little differently. Inflation is rising while economic recovery is anything but steady. Trends that used to set predictions in motion have been put on pause. Renting might provide the freedom you need right now, while homeownership could bring stability and a path toward financial freedom.

If you’re considering buying a home in 2022, now is the time to take action. Rates are affordable, and home loan terms are favorable for qualified buyers. Connect with a local mortgage advisor to discuss your goals. The right mortgage can help you build financial security through homeownership.

Taking Action

Connect with a mortgage advisor. There are several custom loan options, along with FHA loans, VA loans, conventional mortgages and jumbo loans with great mortgage rates right now. So whether you’re a first-time homebuyer or becoming a homeowner for the third time, the right mortgage can help you build financial freedom. We’d love to help.