Like all other personal decisions, home ownership has
its advantages and disadvantages. It is vital that you fully evaluate
your situation before making any conclusions.
The following are all advantages of home ownership:
- Tax advantages- The
tax shelter that owning a home provides may be its biggest plus. Currently,
property taxes and interest on mortgage payments are tax deductible
on your federal and most state tax returns. These write-offs can greatly
reduce your tax liability and also make the mortgage payments more affordable
as compared to rental payments. In fact, the first half of a 30 year
mortgage is comprised of mostly property taxes and mortgage interest;
therefore, a large majority of your mortgage payments will be tax deductible.
- Return of Investment/Equity- For
the last fifty years, owning a home has been a good investment. Not
only do you receive the tax advantages discussed above, but you typically
receive appreciating value in your home over the life span of your ownership.
Although a home's increase in value is not guaranteed, the current trend
in home appreciation has been large enough to fight the rate of inflation.
(Simply put, the value of homes has outpaced the rising cost of goods
and services; thus, protecting the value of the money you have invested
in your home). Also, as a homeowner you are entitled to borrow money
against the equity or value over and above your mortgage balance, which
finance charges are also tax deductible. For instance, many people use
the equity in their home to finance costly home improvements or to buy
a car.
- Owner Satisfaction- There
is something to say about ownership. There is indeed a psychological
satisfaction acquired from owning a home. With
ownership you truly are the king or queen of your own castle, excluding
local laws of course.
The following are all disadvantages that can be associated
with home ownership:
- Cost- The money required
to buy a home may put a strain of your savings. A 20% down payment on
a property of $100,000, will require you to come up with $20,000.Yet,
first time home buyers programs may assist or lower your down
payment requirements.
Also, the upkeep of a home can be very expensive. Although
the condition of the home you will buy will determine the frequency of
repair. Unlike renters, who rely on their property staff for maintenance
repair, home owners are responsible for all repairs including but not
exclusive to:
- Heating and Cooling systems
- Roofing
- Plumbing
- Exterior and Interior Walls
- Driveway
- Electricity and Appliances
Inflexibility- A house is a major investment; therefore,
the money you have tied into it does not easily allow you to pick up and
move at your leisure without first selling your house. Depending on the
current conditions of the housing market at your anticipated move, you
may not be able to sell your house quickly. When interest rates are up,
there are a decreased number of consumers looking for homes due to the
increased cost of borrowing money. Consequently, plans to relocate can
become delayed if you cannot find someone to buy or rent your home in
a sufficient timeframe.
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