Sure, it's tough to pull the trigger and buy a home, especially as a first-time buyer. The big hit of covering both a down payment and closing costs is enough to scare any prospective buyer into staying a renter. When you combine the fact that you'll be responsible for any fixes the house needs and that it's pretty difficult to just pick up and move, owning your own home gets more frightening by the minute. But fear not, the advantages of owning a home far outweigh the risks. So if you're already looking for a home, continue to do so. If you're a renter, it's time to reconsider.
Benefits:
Save big on taxes.
When you own a home you'll have to pay a mortgage and property taxes. It stinks, we know. However, the interest on those bills can help. They're fully deductible for both federal and state income taxes. The first few years of your mortgage payments mostly go towards interest, which means a big-time deduction for you. As a plus, many times all costs associated with buying a homeincluding those involved with your loan application and home appraisalare usually deductible.
Equity is your friend
Put simply, equity is the appreciation of your home's worth over what you owe on it. That's money in your pocket; money you can't accumulate if you continue to rent. Stats show that homes have appreciated in value every year in the United States since 1968. That includes years of economic downturns and recessions. What's more, you can build equity my making improvements to your house that you can immediately enjoy, such as installing a pool or redoing a bathroom. You'll reap those benefits further down the road when you sell your home.
Appreciate appreciation
The appreciation of your home's worth is the single biggest contributor to your equity. Homes are considered a great investment over the long term due to their outstanding historical track record. The value of a home typically appreciates at the rate of inflation, plus an additional 1 to 2 percentage points. In booming markets, such as the one experienced over the past few years, home values can grow at a much faster pacealmost 9.4 percent in 2004 alone.
Own to borrow
Owning a home means more negotiating power for you. The more equity you have in your home, the easier it is to acquire a loan or a line of credit to fund home improvement projects, an investment property, or a big ticket item.
No more rental restrictions.
Owning means it's yours. You're free to do whatever you want to your new home (to a certain extent, of course). Want to paint? Go ahead. Feeling the need to make those two rooms into one? Get the permits and go for it. Even better, owning a home means no noisy neighbors above you and no paper-thin walls which to share all of your most intimate details to perfect strangers through.
Sweet & Stable
A fixed mortgage rate means you'll know exactly what your house payments are going to be up to 30 years from now. Even adjustable rate mortgages cap out at a certain level. Knowing what thisundoubtedly your biggest bill each monthamount will be well into the future can help you plan for further down the road. Renters have no such luxury, as their rent canand usually doesincrease yearly.
Risks:
Appreciation isn't a guarantee
Though history shows long-term homeowners routinely reap the benefits of appreciation and equity, the housing market canand hasslipped over the short term. Research the area in which you want to live and make sure any prospective neighborhoods show low crime rates and growing value.
It isn't cheap
As a general rule, mortgage payments are usually more per month than rent. As an owner, you'll also be responsible for maintenance and repairsno more landlord to do that for you.
Menacing mortgage
If for some reason you can't make your house payments, it spells big-time trouble. Lenders could foreclose on you, meaning you could lose the home and all of the equity accumulated so far. Renters, on the other hand, can usually just downsize to a smaller apartment if they find their monthly rent too much to bear.
Pick up and go?
Not so. Owning a home generally means fewer options when it comes to moving. Depending on the state of the market, it could take quite a while to sell your house. Waiting for escrow to close could prolong the process.
Got a Question? Ask.
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Frequently Asked Questions
If one of my sisters retained a short certificate ...
By: Janice | 29-09-2008
If one of my sisters retained a short certificate does she have the authority to sell and do what she wants with the property and jewelry when there are 5 other brother and sisters involved?
Making a blouse colorfast
By: Nyssa | 29-09-2008
I have a red blouse that stains everything pink! It's been washed maybe half a dozen times already, but it still stains everything else in the wash, the bra I wear it with, my skin, and even the top of my jeans. Is there anything I can do to help make this shirt more colorfast?
Will bailout help or hurt?
By: Jenni | 29-09-2008
Our house has been foreclosed. We are assuming the lender will come after us with a deficiency judgement to pay the balance. Will this bailout prevent this or is it just inevitable?
Traveling Consultant Withholdings
By: rdwarrior | 29-09-2008
I am a consultant that is employed through a company. This company send my wages via direct deposit. I get "loaned out" via contracts to other employers. I live in TX and am on assignment in OH. My employer says they need to start pulling out OH taxes even though I travel back and forth between TX and OH on a weekly basis. Is this correct? I maintain my residence in TX and stay in a hotel while in OH. I thought they could only pull out taxes for another state if I stayed over weekends and/or set up a residence?
247 madison ave irvington nj why can'y they sell ...
By: sexykimmie | 29-09-2008
247 madison ave irvington nj why can'y they sell or rent this house?
Previous years returns
By: Gere | 28-09-2008
Can I file previous years returns on line and if so how much info do I need and how do I file? I need to file for 2004 and 2005
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