Should You Buy or Rent a Home?
Is home ownership the right path for you? Should you rent instead?
If you rent will you be jeopardizing the possibility of home ownership
in the future due to rising real estate values? How fast will your
family grow and how much space is needed for your family and their
activities? How much money do you have to pay for housing? When
is the best time to buy a house?
With the rising cost of home ownership in America today, combined
with low mortgage rates, many first time buyers face are challenged
by the answers to these questions.
Buying and owning your own home is more complicated than just having
the money for the down payment and monthly mortgage payments. Owning
a home requires a tremendous commitment of funds, time, and attention.
For some people, owning is not the best or only way to have a comfortable
and safe living environment.
The following topics should help make your decision a little easier.
Advantages
and disadvantages of renting a home
Advantages
and disadvantages of buying a home
Defining
your values
Are you ready
for home ownership
Advantages
and disadvantages of renting a home
For some, renting can be the best option. Considering the high
cost of a down payment on a home, financial considerations are of
top priority. Renting can be viewed as a temporary solution while
you plan your future.
The ADVANTAGES of renting are as follows:
Grounds
maintenance
Appliance
repairs
Remodeling
Home
Improvements
Property
taxes
Your rental
many include amenities such as:
Pool
Tennis
courts
Social/activity
rooms
Laundry
facilities
Security
Parking
There is
no large down payment, only a security deposit.
Many of your
monthly expenditures (rent, utilities) are fixed making budgeting
easy.
You are not
taking any equity risk on the property should there be a downturn
in the market
Close proximity
of neighbors often create a sense of security.
If you do
not like where you live, moving is relatively simple.
It is easier,
especially if you travel/commute often.
The DISADVATAGES of renting are as follows:
No special
tax deductions.
There are
no equity gains in the rising value of property.
Space and
storage is usually less than a home.
Changes to
accommodate your life or growing family cannot be made or are
limited in scope.
Rents can
rise with inflation and or supply and demand in the rental market.
You will
probably have restrictions on noise level, pet ownership, or children.
Advantages
and disadvantages of buying a home
The ADVANTAGES of buying a home:
The home
may increase in value, resulting in a significant gain in net
worth.
The emotional
high derived from ownership and the sense of status created both
at home and in the community.
Homeowner's
tend to have better credit ratings.
The longer
you live in a home, the more equity you build that can be leveraged
using an emergency loan.
Mortgage
payments contribute to an investment, particularly if the property
is located where it increases in value over a period of years.
If you have
a fixed loan, your payment will remain relatively constant for
the life of the loan.
The interest
paid on your loan and taxes are legitimate income tax deductions.
Ownership
may contribute to security, especially in retirement years when
income normally decreases.
A homeowner
can borrow against his/her equity, as the value of the home increases.
More space
may be available for family members and their activities.
As a homeowner
you have the freedom to make improvements and changes to the home
and surroundings as desired (although a development or association
may have restrictions and prohibitions).
Home ownership
can contribute to the general well-being and sense of "roots"
of the family, especially for children.
Homeowners
generally are concerned about community affairs and how they may
affect their property.
The DISADVANTAGES of owning a home
A substantial
down payment is needed.
Owning a
home requires a substantial commitment in time, emotions, and
money.
Homes may
decrease in value if the neighborhood deteriorates, changes quickly,
or the real estate market suffers a decline.
Due to the
initial expense of buying a home, financial resources may be limited
or reduced for other purchases or activities.
Maintenance
and repairs are inevitable and could be costly.
Part of home
ownership includes procuring enough income to afford insurance
of all kinds including loss of the house as a result of a natural
disaster.
Budgeting
is cumbersome and a must in preparation for maintenance, repairs,
home improvements, and/or home ownership/association dues.
Depending
on where you live property taxes could increase dramatically.
The cost
of buying a home should also include the cost of moving into it
and furnishing it.
Shifts in
the neighborhood could drastically affect ones lifestyle.
Security
is an issue if you are not home often due to travel.
Unexpected
loss of income due to job termination or unemployment may limit
money available for home ownership costs.
Define Your Values
Decisions, decisions. The very best way to proceed is to list all
the factors about your life that are important to you.
What type
of living situation would make you feel the best about yourself?
Do you have
certain neighborhood preferences that would be limited by either
decision?
Which decision
would strap you the most financially?
If you have
family (married, children) which decision would impact their lives?
Which is
more important to you, what type of place you reside in or the
furnishings within, or both?
What are
your lifestyle requirements?
Do you
like to entertain?
Do you
own a boat or RV?
Do you
need a garage because of your hobbies)?
What
is the distance you would have to travel to work, school, church,
shopping?
How important
is privacy?
How much
time and what skill sets do you need to have to devote to maintenance
and upkeep?
Are You Ready
for Home Ownership
The Neighborhood
Life can be greater than you thought or it can be a nightmare if
you do not consider the neighborhood as part of
your decision. Here's a list of things to check and consider.
Local history
Local government
Its proximity
to:
Factories
Trains
Airports
Traffic
Highways
Farms
Sanitation
Appearance
Schools
Whether the
neighborhood is appreciating or depreciating in value.
Safety and
security.
Accessibility
Little things like driving through traffic bottlenecks or through
industrial zones to get to shopping, schools or work can be a real
issue over time. Consider the convenience of your desired neighborhood
in relationship to:
Work
Shopping
areas
Schools
Entertainment
and lifestyle activities
Places of
worship
Condition
of the roads
Available
public transportation.
Community Facilities
Unless you are on the Internet 24 hours a day seven days a week,
you will want to use the local resources to enhance your life. Consider
looking into the following:
Police
Fire stations
Health facilities
Sanitation
services
After school
activities
Recreational
facilities, such as parks, golf courses, hiking trails, etc.
Other considerations
If you are buying consider what the neighborhood offers for you
and your particular lifestyle. Furthermore, this might be a good
time to evaluate your particular needs and how they might affect
the potential to sell the home in the future. As an example, suppose
you choose a home far from schools and children's parks because
that is not a concern for you in your life now. What you might want
to consider is how distance from these facilities might affect the
ability to sell your home one day to buyer who may have a keen interest
in those things. Conversely if you are renting, these may or may
not have a bearing on your life now or after you move.
The apartment or home itself
Space, arrangement,
and condition.
Bedrooms
and bathrooms (enough space and privacy).
Kitchen and work area (well planned and step saving, adequate
work and storage areas).
Dining and
living areas (adequate for family entertaining and resting).
Storage (adequate
and well placed).
Room sizes,
shapes, and wall areas to permit use of furnishings and equipment
on hand or planned.
Interior
and exterior finishes (acceptable types, condition, and ease of
maintenance).
Heating and
lighting (adequate and efficient systems).
Outdoor space
(patio, deck, lawn, garden space, outdoor storage).
How Much
House Can You Afford?
Buying a house commits you to a long-term relationship with a mortgage
and requires a considerable amount of time and energy that most
homeowner will tell you becomes second nature. American consumers
spend from 21% to 54% of family income on their housing. How much
each family spends on housing depends on many factors.
Three basic considerations that can help a family determine
how much home they can afford are:
The amount
of take-home pay the family can reasonably expect.
The family's
living costs and other debt payments.
The total
amount of housing expenses, including: taxes, insurance, energy,
furnishings, maintenance, and mortgage payments.
Please contact us with any questions or concerns you may have.
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