Purchasing a home will be one of the biggest decisions of your life. The best things you can do are to educate yourself, prepare financially, and weigh the pros and cons. Take a look at some of our advantages and disadvantages of owning a home.
Homeownership – Benefits
The most obvious benefit of homeownership is accumulation of wealth over time. Each monthly payment you make, equity is accumulating – almost like a forced savings plan. Over longer terms, buying is in fact cheaper than renting. Also, the interest you pay each year is fully deductible on your taxes, both for your mortgage and any home equity lines as well. Other benefits include:
- Capital gains exclusion up to $250,000 for singles and $500,000 for married couples on profits from the sale of a home.
- Mortgages are fixed therefore your costs are predictable and more stable. Your monthly payments will stay the same for the entire period of the loan, making it easier to plan and budget.
- You can take pride of homeownership – you’ll have a place that is uniquely yours that you can customize however you please.
- With today’s low interest rates, mortgage payments are generally lower than rental payments.
Homeownership – Disadvantages
Owning a home is not always the right decision. It is a long-term financial commitment, so the ability to leave an area quickly and easily can be negatively impacted. You should also be prepared for the responsibility of maintaining your property that can be costly. Other disadvantages include:
- Fixed mortgage payments are generally higher than rent payments when interest rates are high.
- Property values could depreciate – your home can lose value for a number of reasons such as economic conditions or a drop in neighborhood home values.
- Buying a home requires a down payment, closing costs and moving expenses.
- The value of your home may not increase – especially during the first few years.