This is a common question for people who are thinking about buying a house. There are advantages and disadvantages when you’re renting vs owing a home. Renting is much easier. You’re housing expense is fixed each month — there are no repairs and renters generally do not spend money on home improvement projects. On the down side, your rent generally increase each year and the money you pay for rent are gone forever.
Advantages of Home Ownership
When you own a house, there are several advantages:
- As you pay down your mortgage, you’re building up equity in the house.
- Your home may go up in value. This is almost always true in the long-term. In general, real estate price will keep pace with the inflation rate.
- You may be able to deduct your mortgage interest, saving you some money at tax time.
- Most importantly, you have something that is yours that you can enjoy.
Disadvantages of Home Ownership
That said, there are also some disadvantages that you have to consider:
- It is expensive to buy and sell. In general, it will cost you about 3% of the home value when you purchase the home. Of course, you can ask the Seller to help pay for this cost. When you sell, it will cost you about 8% of the home value. This means that you have to let your home appreciate about 10% before you break even. This generally takes about 5-7 years.
- Your home may NOT go up in value. As many people who bought during the peak of the market can tell you…price appreciation is not always guaranteed (especially in the short term)
- You have to pay for repairs and maintenance.
Now that you know some of the pluses and minuses, you can decide if buying is right for you. Personally, I own several homes so I am definitely in favor of owning a home.
If you’re still unsure, contact me and we can talk about your situation. I can help you customized a plan that is right for you.