Pros and Cons of Owning a Home
There are many advantages to owning a home, but there are disadvantages. If you are thinking about becoming a homeowner, you must weigh the pros and cons. Buying a home is one of the most significant investments in your life. Use this pros and cons list to determine if you are ready to purchase a home.
- Investing and Building Equity
Buying a home is a long-term investment. Your home’s value increases as you build equity. So over time, your home will appreciate in value. In July 2020, the average home price index went up 5.5%, according to the Home Price Insight Report. Whether you decide to sell or retire and downsize, you will walk away with a profit. The capital made can qualify you for a capital gains exclusion when you sell your home. In addition, it will allow you to enjoy the income tax-free. Be sure to meet with an accountant if you are unsure if you qualify.
- Privacy and Control
Can you say total control? Unlike renting, buying a home gives you control over your home. For example, determining where you purchase your home, you may not need permission from the HOA or landlord to renovate your home to fit your lifestyle. You will not only have control, but you will also have privacy. Whether having a gathering or just relaxing in your backyard, you will have the privacy you need to do so in peace.
- Improve Credit
You must maintain regular mortgage payments to build credit. As a result, your credit score will decrease when you take out a loan. Your credit score will go down because, on paper, it shows you took out a sizable loan that you have to pay off. However, as you make payments regularly, it will increase your credit score.
- Taxes and Fees
Owning a home comes with taxes and fees that will have to be paid regularly. Fees include property tax, HOA fees, homeowners insurance, private mortgage insurance, and more. Property taxes help pay for local services like roads, fire departments, schools, etc. Usually, your lender will include this in the monthly payment to the escrow account. If you purchase a home that operates under a homeowners association (HOA), expect to pay HOA fees that help pay for community amenities. More taxes and fees will be added to the list of payments as you go through the home buying process.
- Upfront Cost
You would need a 20% down payment to become a homeowner in the past. However, you can qualify for a mortgage in today’s market with a 3% down payment. It may sound like a good deal to have a low down payment, but you will have a high monthly interest rate in return. Your mortgage insurance payments will be high as well.
- Less Flexibility
When you are making the switch from renting to buying consider getting a rent to own agreement. You should also prepare to live in your home for at least 5 years if you want to make capital from selling your home. Being a homeowner does not give you the flexibility to live in an area for short periods of time if you plan to make money on your investment.
As a future home owner remember to do your research and weigh the pros and cons. By doing this you will determine if you are ready to purchase a home. Ask yourself if you are ready to settle down, can you afford the upfront cost, are you ready to improve your credit and are your ready to be in control of your home. For more helpful homeowner and realestate blogs go to www,nancyopensdoors.com.