Pros and cons to buying vs renting in the Lakes Region

In the Lakes Region, and I’m sure everywhere in New Hampshire, the big question of renting versus buying a home is on a lot of people’s minds, especially first time home buyers. This question comes up frequently because the housing market has been so crazy the past few years here in the Granite State.

Yes, we do have an affordability issue.

In a short period of time, the median price for a single-family home in NH has escalated to a record high in June of $565,000. In comparison, the state broke the $300,000 median home price barrier in 2019. That’s certainly a huge increase.

There are advantages to both buying and renting, depending on your current lifestyle and financial situation. Here are things to consider when deciding which is the best option for you…

Advantages of
home ownership

Stability and more permanent roots

Home ownership can provide a stable environment for you and your family and can contribute to feelings of pride and fun (Who doesn’t want to put those Pinterest home décor boards to good use?), plus you get greater community involvement.

When you purchase a property, you have the luxury of staying as long as you’d like. There is no risk of a landlord selling the property, evicting you, or suddenly raising your rent beyond what you can afford. If you have a fixed-rate loan, taxes and insurance rates may rise over time, but your principal and interest payments will never go up.

The key question is: How financially ready are you for the costs and responsibilities of home ownership? You have to factor in the extra future costs, including maintenance of the landscaping, interior and exterior maintenance of the home, property taxes, insurance, sewer/septic, and water, etc. You have to look at your long-term goals and lifestyle.

Freedom to control your environment

When you rent, there may be limitations on what you can do with the property. You may not be able to have pets or hang pictures on the walls.  When you buy a home, you have the freedom to live as you wish. If you want to adopt a dog or dig up some grass to plant a garden, you don’t need anyone’s permission (unless you live in an association with strict bylaws – but that’s another topic). If you don’t like something about the house, you can change it to fit your needs and your style.

Whether it’s fresh paint and carpets or a total kitchen renovation, improvements you make can often increase the value of the property, and at the same time, experience pride of ownership and something permanent. Buying a home creates a lifestyle that can give you access to a larger variety of neighborhoods or country locations like we have in the Lakes Region. Also, there are many water access neighborhoods and communities to consider around our area lakes.

Tax benefits

Many tax benefits could potentially make owning a home a wise decision. For mortgages originated after Dec. 15, 2017, you can deduct the interest on up to $750,000 of mortgage debt if you file jointly. This potential deduction is one of the most significant benefits of owning a home versus renting.

Furthermore, you can deduct up to $10,000 in property taxes. For 2025 through 2028, I believe the limit increases to a maximum of $40,000 with deductions based on income.

With a primary residence, when you sell your home, you may be able to exclude a portion of the gain up to $500,000 for a married filing jointly or $250,000 for single filers. Home office deductions and energy credits are other possible benefits. Ask your accountant about the many specific tax benefits of purchasing a home.

Increasing your net worth

When you buy a home, your monthly mortgage payments are somewhat like a forced savings plan. Over time, you accumulate equity, which represents your ownership interest in the property.

You can convert this equity to cash by either selling the property or borrowing against your equity with a home equity line of credit. And if the market goes up, your house may increase in value and appreciate over time, resulting in a capital gain when you go to sell. When you rent, your monthly payment only contributes to your landlord’s equity.

Renting advantages

Maintenance/repairs

When you rent, repairs are the landlord’s responsibility. If a pipe bursts at 3 in the morning, it is a nuisance, but it’s not your problem to fix.

However, keep in mind some landlords do minimal repairs and sometimes leave the property in a constant state of disrepair.

When you own a home, it’s your problem and your expense. It doesn’t matter whether you’re buying a new or an older home; all buildings require regular, ongoing maintenance on both the exterior and the interior. Ignoring seemingly small issues or routine maintenance can amount to significant problems over time if not dealt with correctly and regularly.

Increased mobility

When you own a home, you are responsible for the payments on the loan until you pay it back in full. If you want to move, you must first either sell your home or rent it out (and hope you have responsible tenants). If you have to travel often in your career or haven’t settled into a job you like, or if you’re a free spirit who wants to be able to change your surroundings on a whim, it might make sense to continue renting. As long as you don’t have a long lease contract, you are free to move about the country when you rent.

Monthly payments

Depending on the price range in the area you are considering, monthly payments may generally be higher when you own a home. However, because interest and property taxes can be deducted on federal income taxes when you itemize your deductions, it often still makes financial sense to buy, especially for future appreciation. A key factor will be the interest rates at the time of purchase and, of course, property taxes.

Market volatility

There are no guarantees that a property you purchase will increase in value. Have you ever heard of the phrase “being underwater” on a mortgage? Major market shifts, global events, or even wear and tear from neglect can cause the value of your home to decline.

However, in New Hampshire, with its current housing shortage over the last five years, average home equity increases have amounted to $158,684, the second highest in the country, so those homeowners made out well.

All things considered…

The equity, opportunity, and freedom homeownership affords undoubtedly contributes significantly to the “American Dream.” While home ownership is certainly not for everyone, there is tremendous pride and accomplishment gained in calling a property your own. For many people, owning a property creates more permanent roots and fond memories. It also establishes a sense of security, deeper community involvement, and peace of mind.

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This article was written by Frank Roche, president of Roche Realty Group with offices in Meredith and Laconia, and can be reached at 603-279-7046. Visit rocherealty.com to learn more about the Lakes Region and its real estate market.