To buy or not to buy. It’s a question many people struggle with. And it’s important to know if you truly want to own a home before you’re firmly entrenched in the homebuying process.
To help you decide, here are some general advantages and disadvantage of homeownership:
A sound investment.
If you choose a home you can afford, the payoff can be great. When you make a mortgage payment each month, you build equity in a place of your own (unlike a rent payment). Equity is the difference between the value of the home and your outstanding mortgage. The longer you stay in your home (and the more payments you make), the more equity you’ll have. And, unlike most things you buy, a home will almost certainly increase in value over time – which builds even more equity.
A first step.
As you build up equity in your current home and comfort level in being a homeowner, it may be easier to move up to another home in the future.
Satisfaction and security.
As a homeowner, you can decorate and renovate your home any way you like. You don’t have that luxury as a renter. Owning a home also gives you a new sense of pride in your surroundings. Your family may also feel strong ties to your community.
When budgeting, you’ll have to factor in more than your monthly mortgage payments. Consider things like condo maintenance fees and repair expenses.
Tying up cash.
Your home will probably increase in value as time goes by, but don’t count on getting a big return quickly. If you need to sell your home during the first few years of homeownership, you could lose money given the various costs involved.
There’s no guarantee your home will increase in value, especially during the first few years. Although historically, over the longer term, homes have proven to increase in value.
To calculate your personal cost difference between renting and buying, try this Rent vs. Buy Calculator.