In Part 1 of my Renting vs. Buying a Home series I talked about the questions you should ask yourself before buying a home. Mortgage rates have been low and apartment rent prices seem to keep climbing. So is it finally time for you to buy a house? Creating a pros and cons list can help you get a clear picture of the path you should take. Even if you have the financing to buy a home, doing so at this time may not be right for you. Home ownership is a long-term, committed financial obligation and isn't always the best course for everyone.
Pros and Cons of Buying a Home
- Ability to say, "I own this property" is incredibly satisfying!
- Can remodel, paint, and remake the house to your heart's content.
- Security in knowing you will likely call that place "home" for a long time.
- Can take advantage of tax deductions for loan interest, points, and various taxes.
- Monthly payments will remain the same with a fixed interest rate mortgage.
- Financially responsible for entire amount of loan.
- Financially responsible for property taxes, homeowner's insurance, and private mortgage insurance (if applicable).
- Both financially and physically responsible for all repairs and upkeep.
- Committed to living in one place until the home can be sold for or above the original purchase price.
- Committed to any less-than-desirable neighbors unless one of you decides to move.
- Susceptible to property value fluctuations, affecting whether or not you would lose money if you needed to sell and move.
Pros and Cons of Renting a Home
- Can easily move to a different neighborhood or state if the location turns into something undesirable.
- Not responsible for any additional housing costs beyond that of rent and utilities.
- Not responsible for any routine repairs or upkeep.
- Committed only till the end of the lease or until you are able to sublet.
- Monthly payment builds equity for your landlord and not yourself.
- Rent price may increase at the end of a lease.
- Limited to implement your own personal touches with paint colors, fixtures, remodels, etc.
- There is no guarantee that you can renew the lease at the end of your term.
Buying a home is a huge commitment that shouldn't be rushed into. I have friends who went into foreclosure because they purchased a renovation home that they really couldn't afford. Making a pros and cons list would have helped them see that while they could pay for the mortgage, they weren't able to afford the necessary upkeep and repairs as well.
Sadly, when something had to give it was their monthly payment. Don't let this happen to you! Make a sound decision by weighing all of the good and the bad that can come from owning a home.
Do you rent or own your home? What pros and cons are on your list?
Check out Renting vs. Buying a Home - Part 1 here.