The pros and cons of buying home
Buying a home is a major life decision that comes with a lot of responsibilities. There are positive and negative aspects to consider. Are the rewards worth it? How will this purchase affect your lifestyle and does it make sense financially. Continue reading our list of the pros and cons of buying home to help you make the right decision.
Pros:
- Great Investment ““ While the real estate market typically goes up and down, in the long run your property should increase in value and give you a substantial return on your investment.
- You build equity – Paying your mortgage every month increases your home equity. Essentially the amount you own on your home loan goes down every time you make a payment. The difference between that amount and the worth of your home is your home equity. As your home increases in value, so does your equity. When necessary, you are able to borrow against your home equity to meet a variety of financial needs.
- Sizable tax deductions – Your mortgage interest and property tax payments can be deducted from your federal taxes, as well as many state taxes. These tax deductions can put a significant amount of money back in your pocket each year, essentially reducing your mortgage payments even further.
- Predictable monthly payments – Your payment on a 30-year fixed mortgage will always stay the same. Unlike renting, purchasing a home protects you from inflation and your monthly payments will never go up. In addition, after your mortgage is paid off, you will live in your home for almost nothing, free of monthly payments.
- Privacy and freedom ““ As an owner of a property, you will be faced with far fewer restrictions in terms of what you wish to do on or with your property. You are in charge of creating the living environment you have always wanted. You can freely add or modify your home, potentially adding even more value to the property. Unlike most rental units, owning a home allows you to house a wide range of pets.
- Improved credit score ““ Being consistently on time with your monthly mortgage payments helps to build a strong credit history. This demonstrates to other lenders that you are low risk borrower, which can be very helpful with future purchases, like buying a car or other major expenses.
- You may become somebody else’s Landlord ““ Since you own the property, you are free to rent out your basement or perhaps an extra bedroom for additional money in your pocket every month.
Cons:
- Upfront payments ““ When buying a property you must be ready to put down upfront a considerable amount of money. You are required to put down at least 20% on your home before you can take out a loan. In addition, you will have to pay for closing costs, which can easily add up to $10,000. Not to mention, any cosmetic repairs you wish to make, will have to be paid for out of pocket.
- Long-term commitment ““ Most mortgages lock you in for duration of 30 years. If you wish to prematurely pull out of the contract, you will first have to find a buyer who is willing to buy your home. This process can take months or even years. Until then, you have to remain in the house, or at the very least make the monthly mortgage payments.
- Higher monthly payments ““ Mortgage payments are generally higher than rent payments. Unlike rental units, which may sometimes come with utilities included in the rent, you are responsible for all utilities in your home.
- Maintenance ““ You are responsible for all maintenance repairs on your home. Although sometimes they can be inexpensive repairs like fixing a broken toilet or a leak, maintenance costs can become excessive.
- Decreased home value ““ Often times the real estate market is so unpredictable and ever changing. This puts you at risk of losing value on your home.
- Foreclosure ““ If you lose your job or and are straining financially, you will lose your home to foreclosure if you fail to make your monthly mortgage payments. This means your equity and all of the capital you have already invested in upgrades and repairs is lost as well.
- Sustained damage ““ Your home is always at risk of sustaining damage, anything from a broken window to something more severe life flooding. If your home is not fully insured, repairs on your home can be detrimental to your financial situation.