Homeownership has many benefits and advantages as compared to renting. There is an obvious advantage when looking at the lifetime purchase of a home, rather than a temporary renting situation. Why put all that money towards rent when you could be putting it towards your own home? This is a common point people make when speaking about buying a house, but what about everything else that is less commonly known? There are many advantages and disadvantages to consider to read up and listen close!
More Stable Housing Costs
Rent payments can be unpredictable and typically rise each year, but most mortgage payments remain unchanged for the entire loan period. If the taxes go up, the increase is usually gradual. This stable housing cost especially important in times of inflation when renters lose money and owners make money.
This can make it easier to plan with your payments since you most likely won’t have any hidden fees every month that some places try to put on last second. When you have no surprises in your monthly payment, it becomes predictable of what’s expected of you.
Homeowners can be eligible for significant tax savings because you can deduct mortgage interest and property taxes from your federal income tax, as well as many states’ income taxes. This can be a considerable amount of money at first because the first few years of mortgage payments are made up mostly of interest and taxes.
If you need to refinance to consolidate other debts (an opportunity you don’t have if you are renting) the interest on this is also tax-deductible.
Instead of payments disappearing into someone else’s pocket, homeowners are building equity in their own home. This is often one of a person’s biggest investment assets. Each year that you own the home you pay more toward the principal, which is money you will get back when the home sells. It is like having a scheduled savings account that grows faster the longer you have it. If the property appreciates (and generally it does), it is like money in your pocket. You are the one who gets to take advantage of that, not the landlord. You can then use this equity to plan for future goals like your child’s education or your retirement.
It is Yours!
When you own a home you are in control. You have the freedom to decorate it and landscape it any way you wish. You can have a pet or two. No one can pop in and inspect your home and threaten to evict you. When owning a home, you can make all the renovations you want and have it be unique to you and your style.
Even college students who are out on their own can often benefit from homeownership. It puts them ahead of other young people their age financially by helping with their credit and giving them what is often an excellent investment. Often a college student buying a home will rent the rooms out, and his or her roommates end up making the payments for the house. When the student is ready to move on, he or she can sell the home (hopefully making a profit) or keep it as an investment and continue to rent it.
Buying a home is an important decision. It is often the largest purchase a person makes in his or her life. Homeownership also comes with some increased responsibilities and isn’t for everyone. There are some disadvantages to homeownership that you should take into account.
The Bad and The Ugly
Your monthly expenses may increase, depending on your situation. Even if the monthly payments are the same, homeowners still have to pay property taxes, all the utilities, all the maintenance, and upkeep costs for the home. Often you need to supply appliances that were furnished with a rental. Not only this but it’s wise to get homeowners insurance as well.
Review your finances and be honest with what you can afford, that way you don’t end up in an impossible position.
Risk of Depreciation
In some areas with overinflated prices, there may be a risk that the house will depreciate instead of having an increase in value if the prices go down. If you then sell the house, you may not get enough money from the home to pay back your mortgage, and you will still owe the mortgage company money. This is why it’s important to research the area that you are planning to buy in. Don’t just look at the most recent history, but look at all of it and the other houses in the neighborhood.
Possibility of Foreclosure
If for some reason you are unable to make your payments, you risk having the lender foreclose on your property. This can result in the loss of your home, any equity you have earned, and the loss of your good credit rating. Avoid foreclosure by planning, doing your research, and having a backup plan. It’s important to know your financial limits when purchasing a home and to have a savings account that you are constantly contributing to in case of an emergency.
When considering homeownership, you need to weigh the advantages and disadvantages for yourself. If you are like most people, you will find that homeownership is worth the risks and disadvantages if done correctly. Get yourself a good realtor and make sure that you know the ins and outs of home buying before going through with a purchase. Whether you’re a seasoned real estate investor or you’re buying your first home, it’s important to always remain knowledgeable of the housing market you’re buying in.