Yes, it's hard to take the plunge and buy a house, especially if it's your first time. The big hit of paying for a down payment and closing costs is enough to scare off any potential buyer. When you think about how you'll have to pay for any repairs that need to be done and how hard it is to just pick up and move, owning your own home becomes more and more scary by the minute. But don't worry, because the benefits of owning a home are much greater than the risks. So, if you are already looking for a place to live, keep looking. If you rent, it's time to think again.
Benefits:
Get a big tax break.
You'll have to pay a mortgage and property taxes if you own a home. We know it stinks. The interest on those bills, however, can help. Both federal and state income taxes let you deduct the full amount. During the first few years of your mortgage, most of your payments go toward interest. This is a big savings for you. As a plus, most of the time, you can deduct all of the costs of buying a home, including those for your loan application and home appraisal.
Equity will help you.
Simply put, equity is the difference between how much your home is worth now and how much you still owe on it. That's money in your pocket that you can't get if you keep renting. Stats show that the value of homes in the United States has gone up every year since 1968. That includes years when the economy went down or stopped growing. You can also build equity by making changes to your home that you can enjoy right away, like adding a pool or remodelling a bathroom. You'll get those benefits when you sell your home in the future.
Appreciate appreciation
The value of your home going up is the single biggest factor in how much equity you have. Because of how well they've done in the past, homes are seen as a great long-term investment. Most of the time, the value of a home goes up at the rate of inflation plus 1 to 2 percentage points. In booming markets, like the one we've had over the past few years, home values can grow much faster. In 2004, for example, home values went up by almost 9.4 percent.
Have to lend
If you own a home, you have more power when you negotiate. When you have more equity in your home, it's easier to get a loan or line of credit to pay for home improvements, an investment property, or a big-ticket item.
No more rental restrictions.
It's yours if you own it. You can change your new home however you want (to a certain extent, of course). Looking to paint? Go ahead. Do you want to combine these two rooms into one? Get the right paperwork and go for it. Even better, when you own a home, you don't have to deal with noisy neighbours above you or walls that are so thin that you can tell complete strangers everything about your life.
Sweet and steady
With a fixed mortgage rate, you'll always know how much your house payments will be, even 30 years from now. Even adjustable rate mortgages cap out at a certain level. Knowing how much this bill, which is probably your biggest each month, will be in the future can help you plan for the future. Renters don't have this option, since their rent can and usually does go up every year.
Risks:
Not everyone will like you.
Even though history shows that long-term homeowners usually benefit from appreciation and equity, the short-term housing market can and has gone down. Do some research on the area where you want to live and make sure that any neighbourhoods you are considering have low crime rates and are getting more valuable.
Costs a lot.
Most of the time, mortgage payments are higher than rent payments each month. As the owner, you'll also be in charge of repairs and maintenance. Your landlord won't have to do those things for you anymore.
Dangerous mortgage
If you can't make your mortgage payments, you're in a lot of trouble. Lenders could take your home away, which means you could lose it and all of the equity you've built up so far. On the other hand, if renters can't afford their monthly payments, they can usually just move to a smaller apartment.
Grab and go?
Not so. When it comes to moving, you usually have less choice if you own a home. Depending on how the market is doing, it might take a long time to sell your house. The process could take longer if you have to wait for escrow to close.
