Are you currently renting
but thinking about purchasing a home due to the historic low interest rates and home prices? You are thinking wisely, for now is an incredible time to purchase a home, however, as there are many advantages to home ownership, there are indeed disadvantages as well that you will need to take into account first.
The easiest way to do this is to weigh the pros and cons of each, and if after reviewing the entire list, if the pros outweigh the cons to you, it may very well be time for you to pursue home ownership.
No repairs out of pocket, and if so, reimbursement by the landlord will (and should) take place in a timely manner.
No maintenance of property. If you score big with a landlord that prefers to maintain their property themselves by hiring a professional landscaper to tend to the grass cutting, leaf gathering and removal and snow removal, you will not have to take care of these costly chores yourself each year. Some landlords make you handle the snow removal, but they will have a landscaper cut the grass, each landlord is different though, so search wisely.
Many times you do not pay the sewer bill. Many municipalities will bill the owner of the property directly for this. Depending on the landlord, many don’t ask the tenant to pay this bill each quarter so again another expense you don’t have to pay that you would normally if you owned the property
No long term commitments – If you tend to like to change your scenery often, then a rental as opposed to a long term commitment may be for you. This way after a year or two, whenever the lease contract is over, you are free to go with no commitments, whereas if you own a home and are dependent on the sale of the home to move on, you may be stuck there for a while if the market is not moving and you cannot sell your home.
Typically the price to rent a home is significantly less than if you were to hold a mortgage on the same home. These factors can change depending on how much money you put down on the mortgage loan, the interest rate as well as the taxes and insurance on the property.
Redecorating hassle - Getting permission to paint walls, change the interior or exterior in any way can sometimes be a bit if a hassle. If the landlord does not let you change anything, it is quite possible you will be staring at bare white walls. If you have a landlord that encourages change as long as it increases the value and look of the property, they may be all for it, but don’t expect reimbursement from the landlord for the cost to change it, spend the money to make it feel more like your home. Just know when you leave your handy work will stay
You break it, you bought it - If you do something wrong, be prepared to pay for it. If the property has a pool and or a garage it is very possible the landlord may not allow you access to use these things.
Unforeseen circumstances beyond your control. For example, if a home owner cannot keep up with their monthly mortgage payments, it is quite possible the house you are living in can be taken away from the home owner even though you are current on your payments each month, this holds no water to the bank that is owed the money by the delinquent homeowner. If this occurs, the banks are usually accommodating to the tenant and there are laws in place that can protect the tenant to at least be able to finish out their lease term, but after that date, it is usually 30 days to get out.
Animal lover? This may be a problem with your landlord; many do not allow pets and forbid them in their rental home. Or they will allow them but you pay have to pay an extra “pet security” amount in case the beloved pet destroys the floors or chews or scratches up a door etc.
Home Ownership Pros
The house you own is yours to do with what you want, remodel a kitchen, paint walls black, whatever you want, it’s your house, so do as you please!
The house grows equity over time which can aid in your future for investments, etc. You are able to borrow against that money, you can pay off the home in full if you like and have 100% equity, and you can have a line of credit if you choose. As you pay your monthly mortgage each month, your equity continues to grow; and over time your home value may appreciate as well.
Tax breaks on your federal and state taxes like mortgage interest on the loan itself as well as real estate taxes can be claimed thus giving you a cut in your tax rate. This can be a significant amount and a huge benefit to homeownership. Ask an accountant for a more in-depth explanation of this, for this is important in understanding and part of the decision making process when determining if you are ready for home ownership.
Want to have a huge party? Let Uncle Sal move in? No problem, you don’t need any permission as to who lives in your home or what you do in your home as opposed to a landlord who will give you a maximum occupant clause in your rental agreement.
Do you love cats and dogs? Great, you can own them when you own your own home!
Home Ownership Cons
There are no guarantees: Even if you work hard at maintaining your home, property values can drop, depending on the neighborhood in which you live. This is why it's important to choose a house and neighborhood that have strengthening value in the real estate market.
Being a homeowner is usually more costly than renting: Mortgage payments are generally higher than rent, and include the added costs of home repairs and maintenance. As an owner, you must pay for any unexpected costs such as a new roof or heating system. This is why a family budget and a savings strategy are important.
Financial trouble from illness or loss of a job: When you own a home and fail to keep up with your mortgage payments, the mortgage lender could call the loan, which means payment in full or foreclose on the mortgage. This could result in the loss of your home as well as the equity you've built. A renter, on the other hand, can downsize to a cheaper apartment to cut expenses.
Owning a home usually makes moving difficult and complicated: After you purchase a home, you may not have as much flexibility in choosing a new location to live or work.
Take this list as reference and weigh the pros and cons and see if home ownership is a right fit for you. Even if circumstances may seem that it might not be the right time to own a home, seek professional guidance, talk to a mortgage professional that can work with you and your finances and see what you might be able to afford. Whatever they tell you that you can afford, allow your budget breathing room in case something breaks, taxes go up, think about cost of living expenses rising etc. Just don’t max out your monthly income to the point you are suffocating. It’s also wise to not put your life savings into the down payment, keep a nest egg handy for the unexpected events.
If you are interest to buy a home in Southwest Florida, contact John Carney
and his team and they will be glad to help you.