Pros & Cons of Home Ownership
Is it right for me?
Home ownership remains one of the staples that make up the tapestry of the American dream. For many people, buying a house is the largest singular investment they will ever make. So, with that in mind, it is important to make a decision that will serve you best.
There are measurable differences between being an owner rather than a renter of your home. Pride of ownership is an issue for some folks. However, it is subjective whether it brings out a sense of pride or accomplishment. That is entirely a personal issue. Nobody is going to know if you rent your residence or own it unless either they look it up in public records or have been told about it.
The intent here is to offer you objective, concrete facts to enrich the decision-making process.
Stability and Control
Stability is something to consider. Being a homeowner versus a renter means no more landlords; no more worries about the rent being raised unexpectedly; no more rules to follow; and no more concerns about being unceremoniously evicted for myriad reasons.
While you have “skin” in the game, you also have 100% control of your living situation. The only disclaimer to this premise of full control would be if a homeowner’s association (HOA). Some properties, such as condominiums, townhouses, and pre-planned communities have a HOA that may have rules that all residents must follow. Additionally, most have fees that are paid monthly, quarterly, or annually.
Accompanying Costs of Home Ownership
Keep in mind that there are costs associated with that aforementioned stability and control. If the HVAC system needs repaired, you have to pay for it. When something goes wrong with the plumbing, it is your responsibility to fix it. Worn out carpets, walls in need of a fresh coat of paint, an electric box that needs to be replaced, or a driveway that needs to be resurfaced are now your responsibility. Unlike a landlord, a mortgagee (the bank) will not intervene.
Homeowners pay property taxes on their property, which is payable to the state’s government. If there is a mortgage on the property, the bank will insists that the mortgagor (you) carries a homeowner’s insurance policy to ensure the property.
Beneficial Tax Breaks
The flip side of those additional costs is that there also are tax advantages. Homeowners can deduct property taxes and the interest paid on their mortgage on federal and state tax returns. There also could be other deductions as well. However, it is best to seek the services of a licensed tax accountant for specifics instead of making any assumptions, as everyone’s situation or position has a unique set of circumstances.
Equity: Up or Down?
Equity is defined as the actual value of a property that exceeds the amount due on its mortgage. However, there are no guarantees that property values will hold steady, increase, or decrease over time. It is likely that over a course of a mortgage, depending on its length, that property values could fluctuate significantly.
Wouldn’t this be a great place to insert a time machine to assist in the process of making that economically rational decision? Here is where that daunting gray matter lies. There are no black and white scenarios because the future of the economy is unknown. So, buckle up! (Just kidding!)
Better yet … be diligent, do your homework, and decide which situation works best for you before making this type of decision.