Pros and Cons of Owning a Home
Deciding whether to buy or rent a house isn’t simple. Many factors and considerations go into purchasing a home because it is considered one of the most expensive purchases most people will make in a lifetime.1
June is known as homeownership month and we want to discuss the pros and cons of owning a home. In this article, you’ll learn the biggest benefits and drawbacks of renting versus owning a home and what to consider when buying a house.
Renting vs. Owning a Home
People often think it is better to buy a home because mortgage payments can sometimes cost less than rent payments. However, there is much more to think about when deciding whether to rent or buy. Many factors can determine your choice between renting a home such as unrecoverable costs and your future.
You’ll have to think about unrecoverable costs. For homeowners, these costs are property taxes, maintenance, and interest costs. The only unrecoverable cost for renters is their monthly rent payments.
One thing to ask yourself when deciding between renting or owning a home: where do I want to live in 5 years. For example, if you are in the early stages of your career, you may want to move around according to your job opportunities. It may not make sense to own a home if you aren’t planning to stay in your city or if you don’t want to be tied down to one area.
What are the Pros of Owning a Home?
- A potentially good investment: When you own a home, you own a physical asset. You can potentially make income off of your home if you decide to rent it out.
- Cheaper payments: Your monthly mortgage payment can potentially be a lot less than a rental payment if you own a home. However, you’ll have to factor in external costs like property taxes, homeowners insurance, interest, and more.
- Tax benefits: There are tax benefits of owning a home that renters may not get. Homeowners may be able to deduct their mortgage interest and property tax payments from their federal income taxes.
- Ability to customize: When you live in a rental, you may not be able to make any drastic improvements to your living space. But as a homeowner, you have the freedom to make as many changes as you want to your home.
What are the Cons of Owning a Home?
- Closing costs: Closing costs can cost you thousands. According to Zillow, the average closing costs for a seller range from 8% to 10% of the home’s total price.
- Repair costs: When you own a home, you’ll be in charge of footing all maintenance costs. This includes replacing the roof, maintaining the air conditioning, etc.
- No mobility: When renting, it’s easy to pick up and leave once your lease is up. But as a homeowner, you won’t have that same flexibility.
- Market Volatility: If the housing market stays strong, you can potentially make a profit if you decide to sell your home sometime in the future. However, your house may depreciate if the housing market crashes.
The decision to buy a home will come down to you and your needs. The biggest drawbacks to owning a home mostly come down to costs, including upfront costs, homeownership fees, and maintenance fees. On the other hand, owning a home can be an excellent potential investment if the housing market continues to stay healthy.