Homeownership is a huge goal for many people. It’s part of the American dream. But as great as it is to be a first time home owner, there are challenges that come along with it.
Take a look at the information below to learn more about the pros and cons of owning a home.
Benefits of Owning a Home
Before buying a house, consider the pros and cons of owning a home. We’ll start with the benefits first:
Building equity: The contrast between what you will sell it for and what you owe is equity. When you pay off your debt, your equity increases. Much of what you pay every month goes to the balance on the loan instead of the interest, which builds more equity.
Federal tax advantages: Mortgage interest, including interest on home equity loans, property taxes and other closing costs are tax deductible. However, changes in tax laws that raise the standard deduction and cap deductions make it less probable for younger individuals and those buying starter homes to get tax breaks.
More privacy: An advantage of home ownership that renters don’t experience is the luxury of renovating it to their liking because they own the property.
The Challenges of Owning a Home
Expensive upfront costs: Closing mortgage costs can vary from 2% to 5% of the purchase price, including multiple fees, property taxes, home insurance, home inspection, homeowner’s first-year insurance premium, title check, title coverage, and prepaid mortgage interest points. It takes about five years to recover those expenses.
Less freedom: Since stability is one of the benefits of home ownership, that means it’s harder to accept a new job offer that requires you to pick up and move to another town. Also, if you love to travel and be on the move, homeownership isn’t a good idea. You can’t leave a home the same way that you can leave a rental.
Maintenance costs: There is no property manager to take care of plumbing issues when you own a house. Also, if the air conditioner goes out, you have to pay for it. The same goes for when you need your grass cut and get other home maintenance. However, when you live in a rental, maintenance is covered by the landlord.
With maintenance costs in mind, check out the highlighted link to learn how to prevent water damage.
Illiquidity: While houses do have value, they generally don’t sell as fast as stocks or other assets. During the process of selling your house, you’ll have to continue to make mortgage payments.
The Pros and Cons of Owning a Home
The pros and cons of owning a home is a lot to think about. However, buying a house is never a bad decision. You just have to decide if the disadvantages of owning a home outweigh the benefits of owning a home.
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