Home ownership is usually considered a great thing, even the cornerstone of the American Dream. But it’s not necessarily the right move for everyone. Like almost everything, there are pros and cons of home ownership. Here are some things you should consider if you’re thinking about becoming a homeowner:
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Pros of Home Ownership
One of the primary benefits of home ownership is that in the long run, it tends to be cheaper than renting. If you have a fixed rate mortgage, the costs are more stable and predictable than the cost of rent. You’ll know exactly what your monthly mortgage payment is for the duration of the mortgage, whereas a landlord can increase your rent at the end of every lease agreement.
Additionally, there is a good probability that the value of your property will go up through the years, which means you will have more equity in the house, and not just from paying off the principal. Therefore, your overall net worth will increase.
Owning your home can also reduce the amount you pay in income taxes because you get a tax deduction for property taxes. If you have a mortgage, you can also deduct the interest you pay on the loan. If you are timely with your mortgage payments, you will build up your creditworthiness, which often means lower insurance rates as well as lower interest rates when you borrow money.
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Of course, one of the great advantages of owning your home is that you can do what you want within the constraint of local ordinances, such as having a pet or pets, remodeling, painting with loud colors, and many other things that renting may not allow you to do. You may also find that you have more space and privacy, especially if you purchase a single family dwelling.
Cons of Home Ownership
There are some downsides to home ownership, including the long-term commitment. It is much more difficult to pick up and move if you own the property than it is if you are just breaking or ending a lease. There is also risk involved since there is always the possibility that the value of the home will decrease, especially in the short run. This can be especially problematic if you need to sell your home or borrow against the equity, and cannot wait for the value to go back up.
As a homeowner, you are also responsible for everything related to your home, including making and paying for repairs and upkeep. If you have a pool or garden, you have to maintain it or pay someone to do it for you. If the toilet backs up, you have to take care of the problem yourself or hire a plumber. You can’t just call your landlord and have the issue resolved while you’re at work.
Finally, although home ownership can be less expensive in the long run, it is usually more costly at first. You must make a down payment, which typically must be at least 5% of the sale price. You may also have to pay for closing costs, although these can often be rolled into the total mortgage amount. Most home buyers usually make some improvements and purchases when moving into their home, which also increases the initial cost of home ownership.
It can be a wonderful experience, but it’s important to understand all the pros and cons of home ownership before you take such a big plunge. Be sure to always consider what’s right for you.