Are you looking for a new place to live but aren’t sure if
you should buy or continue to rent?
That’s a decision that almost everyone faces at some point in their
life. Buying a house can seem like a
daunting idea but there are many benefits to being a homeowner. Owning a home can be very rewarding and a
sound financial investment. There are advantages
and disadvantages that go along with being a homeowner. Hopefully this blog post will help you with
your decision.
Some questions to consider if you’re ready to be a
homeowner:
Does it suit your lifestyle?
Does it make sense for you financially?
Do you plan to stay in the same place for a few years?
What does your next five-year-plan look like?
Do you want the responsibility of maintaining the home and making
repairs when needed?
Is it a commitment that you’re willing to make at this time
in your life?
Homeownership comes with many enticing financial and
emotional advantages. They are as
follow:
Build Equity
Homes typically rise in value anywhere from 4% to 6% every
year. Even if your home doesn’t increase
in value, you will be building equity by paying off your mortgage as long as
your home maintains its value. You
increase your degree of ownership in your home with each payment when you have
a home mortgage. You can refinance your
mortgage at more favorable rates or once you’ve paid your mortgage off
entirely, you can borrow against the equity in your home. This borrowed money can aid in funding major
purchases like another home or your children’s education.
Tax Breaks for
Homeowners
Homeowners can deduct their property taxes and mortgage
interest payments when they itemize their federal income taxes. The deductions will offset the cost of your
housing. These deductions can equal huge
savings, especially early on in your mortgage when interest makes up the bulk
of your payments. While you might not be excited about paying property taxes on
your new home, you are able to deduct them as well!
Your House Payments
Will Remain Stable
If
you choose a fixed-rate mortgage, your principal and interest payments will
remain the same for the duration of the loan. You won’t have to worry about any
increases in your monthly mortgage payment like you might when renting. Keep in mind that your homeowner’s insurance
and property taxes can change.
You Can Settle in a
Community
Once you are committed to being a homeowner, you are more
likely to become better involved in your community. You know that you will be there for years to
come and a greater sense of community will help you feel even more at
home. You can get to know your
neighbors, get involved in volunteer work, perhaps join a homeowners’
association, or get involved in local churches or schools.
Potential Investment
Possibilities
If
you are a homeowner and you decide to move, you can choose to rent it out to
generate income rather than sell it.
Covering the cost of your mortgage, or more, with rental payments can
lead to success. If you may consider
this as an option, be sure to select a home that would make a potentially good
rental property in the future.
Decorate and Construct
as You Please
If you want a purple kitchen or a blue bathroom, feel free!
It’s your home! When you own your own home, you are free to paint, rearrange,
and decorate as you please. Unlike
renting, you have the freedom to do whatever with your home, unless you are
part of a homeowners’ association in which you will have not as much freedom
with your home’s exterior. If you wish
to have another room, add one!
Maintenance Freedom
Living in a house enables you with the freedom of how to
approach maintenance issues. You can
choose to either fix it yourself or choose your own contractor. Keep in mind, there may be a monthly fee to
pay for maintenance work covered by the association’s contractors if you live
in a condo or a homeowner’s association.
Increase the Property
Value with Improvements
Improvements to your home benefit
the homeowner when you rent, you just get to enjoy them while living
there. When you are the owner of your
home, you can increase your property value with any improvements that you make.
Develop Stability and
Pride
Develop a more stable living
situation as a homeowner. It is an
exciting and proud moment when you purchase a home. You gain a sense of
independence and freedom. When you are a
homeowner, you have control over your home and you can do as you please with
it.
Some Homeownership disadvantages are:
Paying for Your Own
Maintenance
Although you make your own maintenance decisions when it
comes to your home, as a homeowner you must spend time and money keeping your
home in good repair. It is wise to set
aside funds for unexpected expenses such as malfunctioning appliances, window
replacements, or other repairs.
Your Home is an Illiquid
Asset
In a sudden need for relocation due to a new job or a change
in circumstances, you may not be able to list and sell your home as quickly as
you would like or at the price point that you desire. This is something to keep in mind as a
homeowner.
Property Taxes
It is important to know that property taxes can rise,
lowering the affordability of your home.
You can
calculate the amount that you will pay in property taxes by taking your
property’s assessment and multiplying it by the property tax rate, which is
based on your jurisdiction or location.
Cash Investments
You may need use up your savings for a down payment on your
home, closing costs, and other homeowner expenses. That cash won’t be available for other
investments.
Losing Property Value
There is no guarantee that the value of your home will
increase over time.
Homeowner’s Insurance
Homeowner’s insurance is mandatory if you have a mortgage
payment. As a renter, you aren’t
required to have renter’s insurance but, as a homeowner, your lender requires
you to insure your residence. Typically
you have to pay those insurance premiums along with your monthly mortgage
payments.
Commitment
As a homeowner, you are locked in to your property. If you were to lose your job, you wouldn’t be
able to simply and quickly downsize your home and monthly payments like you
would when renting. You still must make
your mortgage payments each month otherwise your lender has th right to
eventually take your home away.
Responsibility
When you own a home, you are responsible for maintenance and
repairs. When renting, landlords are
responsible for maintenance and repairs but as a homeowner, that responsibility
is on you. This will cost you time and
money.
Additional Costs when
Buying
There are several additional costs outside of the price tag
of the house. Some of these costs
include a home inspection, bank
origination fees, real estate transfer taxes, and more.
Resources:
http://www.zillow.com/home-buying-guide/rent-vs-buy/
http://mashable.com/2015/04/20/home-investment/#.pR6Q4S0aZqf
