Mortgage & Equity
2 Buy or Rent?
This section will discuss:
Guidelines to help you decide if buying or renting is better for you.
The advantages & disadvantages of home ownership.
Should you buy a home, or continue to rent? In mulling over that decision, many people consider one question: "Can I afford to buy?" If the answer is yes, they assume buying is their best option. But you need to weigh more than the finances. You also must ask: "Am I cut out to be a homeowner?" "Do I really want to own a house?" Honest answers can save you time and trauma later on. Consider the advantages and disadvantages of buying a home. Advantages:
- It's your castle. You can pound a nail in the wall without worrying that you'll chip away at your security deposit refund.
- Your housing costs stay somewhat steady. There's no landlord to spring a rent increase on you. With a fixed-rate mortgage, your monthly payments for loan principal (the amount you borrow) and interest (the fee you pay for using the lender's funds) won't change over the lifetime of the loan. Of course, property taxes and insurance premiums will fluctuate. (More on these later.)
- You build equity, or the value of the portion of the house you own. After several years, you have something to show for the money you've spent besides a fistful of cancelled rent checks.
- It's an investment. House values are appreciating or at least remaining stable in most areas. No one can predict what the future holds for housing markets, but, generally speaking, buying a house is a sound investment.
- You get tax benefits. On your federal income taxes, you can deduct what you pay in property taxes and mortgage interest, if you itemize. That can save you hundreds or thousands of dollars each year. See your tax adviser for specifics.
Disadvantages:
- The upfront expenses are hefty. The down payment and closing costs add up to a sizable chunk of cash, due before you even get the house keys.
- Some people end up financially stretched and emotionally stressed. After paying their mortgage and other living expenses, they have little left for anything else. All the more reason to take a hard look at what you can afford.
- Keeping a house in shape takes money....No landlord will rescue you if the roof leaks or the furnace dies.
- ....and time. Even small home repairs and general maintenance, like lawn-mowing, eat into your free time.
- If you need to sell, it will take time. Unlike liquid investments that can be cashed in fairly quickly, a house is a nonliquid investment. It can take months to sell it and get your cash. And the rate at which that investment increases in value will depend on a number of factors.
- Evaluating the financial pluses and minuses of home ownership can get complicated. Your credit union can help you figure out whether to rent or buy, from solely a financial standpoint. But, remember, financial issues are only part of the ure. Only you can weigh the psychological and emotional factors and decide if you're ready to own a home.
