In general, owning my own home has been a great experience. I know that when I come home from work that the house is mine and no one can kick me out, or change my rent payment, not renew my lease etc. Nor can anyone tell me that I cannot have pets, nor do I have anyone banging on my walls or walking heavily in the apartment above me. What I have had to deal with however is a leaking hotwater heater, a broken toilet, clogged sinks, termites, painting the outside of my home to meet my homeowners association requirements, and a few other "emergencies." But, overall, owning my own home has been a good investment for most me, as I suspect it is for most people, but as you can see there are risks. If you understand the benefits and risks of homeownership, you can make the best decision about buying a home.
From Renting to Owning, Increased Monthly Expenses
Depending on your rent payment and the amount of money you borrow for your mortgage your monthly housing expenses might increase. Are you ready? You definitely need to be aware of what you will have to pay for as a homeowner. Some additional items that you may or may not have to pay for are homeowners insurance, real estate taxes, flood insurance, homeowners association due, condo association dues, electricity, gas, water, sewage, trash pickup. Before buying a home, make sure you check with your real estate agent about what expenses are associated with the property you are looking to buy.
Tax Benefits of Owning a Home
For starters, there are costs associated with buying a home. These cost include things like points, application fee, processing fee, real estate transfer taxes where applicable, escrow account startup costs, etc. The great thing about these fees is that some of them are tax deductible. See Tax Deductions for Buying a Home for more details.
There is added benefit for owning a home and paying a mortgage payment. If you have a mortgage then you are paying at least interest and perhaps principle every month. Current U.S. Tax code allows for a homeowner paying mortgage interest to writeoff some of the interest that they pay over the course of the year on their annual tax return. You do not get to do this when you rent. Review additional information about the Tax Incentives of Being a Home Owner. In either case, the tax deductions when buying a home and of owning a home should be consulted with your tax advisor. If you do not have one, you might consider getting one once you become a homeowner.
Who Do You Call When the Toilet Leaks?
Well, If you are a homeowner, you either call yourself or the plummer. You do not call the Landlord...unless you are calling yourself. You being the landlord is sort of a good and a bad risk and benefit of homeownership. On the one hand, there is a lot of freedom in owning your home - no one can say whether you have a dog or a cat or a flock of parakeets. On the other hand, you are the one who has to deal with the upkeep of your AC unit, or making sure you have oil in the tank for your heater. It can be expensive when things go wrong in your home. So be prepared with some sort of "rainy day" fund for emergencies; they will happen.
Property Values Going Down - circa 2007-2008
This is a risk of owning a home. It is an all too familiar newsstory - foreclosure. On a nationwide average in the U.S. in April 2008 1 of every 500 homes are in some type of foreclosure action. Why is this? Well, one could argue that it is due to the bad mortgage loan programs that these homeowners were sold. Another reason could be that property values are going down and no one can refinance out of the bad mortgages that they were sold.
Buying a home with little or no money down and having real estate values go down can be disastrous if you either need to refinance or relocate and need to sell your home. Lesson here, if you are going to buy a home with little or no money down, make sure you are going to stay put for awhile and make sure your credit is good to get the best loan program and to allow an easier refinance if necessary.
Being a homeowner versus renting may be a matter of preference. From what was presented above there is no real clear cut answer to which one is better. To someone, having no responsibility other than paying the rent is worth way more than owning a home. Freedom versus money - you decide. If you are planning on buying a home continue learning more about the process by reviewing The Steps To Buying a Home.
Article by Dale Stouffer. Dale has been a mortgage broker since 1996 and has a Masters Degree in Urban Planning. This Article is designed to be of general interest and should not be considered legal advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.
