Owning your own home is one of the linchpins of the American dream. But sometimes it's the dream where you're giving a speech to a big audience and you seem to have forgotten your clothes. Keep reading to see if owning a home is all that it's cracked up to be.
Advantages of Home Ownership
Pride in ownership
There are a few events in one's life that create indescribable feelings of joy. The birth of a child, your team winning the World Series, and being handed the keys to your first new home. Even without serfs, you'll feel like a king.
Real estate is such a good investment that people buy homes they don't even live in. Go figure. Over the long haul, real estate is an appreciating asset, meaning that your home will be worth more in the future than it does today. Every mortgage payment that you make forces you to invest in your home's equity. And though the housing market has its ebbs and flows, most people do come out ahead.
You can see the effect of this using the HotPads Buy vs. Rent calculator.
And how. The government encourages home ownership by dishing out tax breaks like Brett Favre slings the football. Homeowners can deduct the interest they pay on their mortgage, their local property taxes, and money spent for certain upgrades or repairs. They also get favorable treatment on the profit they make when they sell their home, getting up to $500,000 in profit tax-free in the case of married couples.
When you rent, the only tax break you get is being able to use a shorter form.
A source of emergency cash
Homes can be used as collateral for cheap loans. If you have equity in your home, you can borrow against it at lower rates than credit cards or personal loans and write off the interest you pay on your taxes.
A renter can pay on time for 20 years and it won't help their credit score. As a homeowner, paying on your monthly mortgage is one of the best ways to build a strong credit file that will save you money on your car loan, insurance, and other financial expenses.
Renters are at the whims of their landlords for how the property is maintained, and how long they can live there. Buy your place and you answer only to your mortgage company and your ability to pay your home loans.
Disadvantages of Buying a Home
Barriers to entry
Getting into a home of your own is a lot tougher than renting. You'll need to come up with money for a down payment, have credit that's good enough to quality for a mortgage, and make enough money to cover the mortgage. Want to rent? Get your security deposit and move in.
As a homeowner you are going to be hit with a lot of expenses you did not plan for and can't control. Property taxes gone up? Pay the man. Homeowners insurance premium skyrockets. Pay the man. Water heater conk out? Pay the man. The man likes to get paid.
When you own your home it can be difficult or impossible to uproot and go somewhere else without taking a huge financial hit. Want to go to Africa for two years? You'll need to do something with that house. A simple job change can create a commute that unbearable, and no way to get out of it.br/>
Other Buyers Guide Topics
Jump back for the index articles on the buying versus renting.
Other Web Info
Pros and cons of home ownership from Transamerica.