How Buying a Home Can Actually Save You Money

Young african woman holding home keys while hugging boyfriend in their new apartment after buying real estate.
Ridofranz / Getty Images/iStockphoto

It might not feel like buying a home is a good way to save money. After all, thanks to a (likely) hefty down payment, purchasing a home will probably require you to spend more money at once than you ever have before. But, if you look at the long term, buying a home can actually save you money — here’s how.

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Real Estate Values Rise Over Time

“While buying a home involves some steep costs upfront like the down payment, over time, purchasing property can actually be cheaper than renting,” said Judy Dutton, executive editor at Realtor.com and editor of the “First-Time Homebuying 101” e-book. “The reason for this is because real estate tends to rise in value over time — typically at a rate of around 3% to 4% per year, or much higher. I’ve seen reports lately that some homeowners made more on their homes last year than they earned at their full-time jobs!”

Building Wealth

When you rent, you don’t get to enjoy the benefits of rising real estate values.

“If you rent, your landlord is the one who benefits from this appreciation in property value — not you,” Dutton said. “Renters have nothing to show for the money they spend on rent at the end of the day.”

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Homeowners Can Take Advantage of Money-Saving Benefits That Renters Cannot

Homeownership can save you money in other ways, too, Dutton explained.

“Owning a home often comes with tax benefits, like the ability to deduct the interest on a mortgage,” she said. “Plus, if you get a mortgage with a fixed interest rate, you can lock in a predictable housing payment for as long as 30 years. Your landlord, however, can raise the rent anytime your lease is up, which could be as often as once a year. This all helps explain why historically, homeowners end up with a larger net worth than renters, by quite a large margin.”

Building Wealth

How Long Does It Take To Start Saving Money as a Homeowner?

While buying a home often saves you money in the long term, it’s worth noting that it could take a while for you to get to that point.

“Since homebuyers do pay more than a renter would upfront, it does take time for a buyer to recoup those costs and come out ahead,” Dutton said.

“Exactly how much time it takes will depend on your local housing market, and one easy way to crunch the numbers is the Realtor.com Rent vs. Buy calculator, which compares the local costs of buying versus renting in a particular area over time,” she continued. “For instance, when I enter my own zip code of 11215 in this calculator, I see that buying in my area becomes cheaper than renting as long as I own the home for at least six years. After that point, my home would likely appreciate in value enough that I’d come out ahead by buying rather than renting. Generally, the longer you stay put, the better it is to buy rather than rent.”

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About the Author

Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Before joining the team, she was a staff writer-reporter for People Magazine and People.com. Her work has also appeared on E! Online, Us Weekly, Patch, Sweety High and Discover Los Angeles, and she has been featured on “Good Morning America” as a celebrity news expert. 

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