Monday, June 19, 2017
Buying a Home….The Pros and Cons
This post is going to kick off mortgage week for me as all my posts will be geared towards buying a home and housing. Today I am going to go over some of the Pros and Cons to home ownership and renting. It is important to understand that there is no uniform choice to be made across the board. You have to weigh your own best interests and make an informed decision.
Buying a Home:
The Pros
Freedom to renovate
Having creative control on how to renovate your home is worth its weight in gold. It allows you to live in a home that makes you happy while boosting your home’s value.
Potential for rental income
Many homeowners rent out a portion of their home when they are starting off and that allows them to pay down their mortgage easier and faster. In some situations, you may be able to live practically mortgage free.
Able to build equity in a safe and secure investment
Real estate is still one of the safest investments around. It almost always grows in value over time and every payment you make towards your mortgage is essentially a deposit into a large bank account. Paying your home down is essentially paying your future self. Kind of cool!
The Cons
Unexpected repairs are on you now
The roof needs to be fixed, it’s on you. Water heater goes, it’s on you. The driveway is a mess, it’s on you. Remember that houses are constantly in need of renovations and repairs and they aren’t cheap. Try to have an emergency fund strictly for home repairs because they will happen, believe me.
Your cost per month can vary
If interest rates go up unexpectedly your monthly costs can go up too. Your costs can go up as well when it comes time to renew your fixed rate mortgage. Make sure you plan accordingly and have some extra cash if you cannot afford the fluctuations that may occur.
All the monthly costs are now your responsibility
Many people don’t take into account the monthly costs that will now be on them to make every month. Property tax, insurance, hydro, heating, and many others will now be totally on you to cover. Condo fees are also another big expense so make sure yours are reasonable.
Renting:
The Pros
Lower upfront costs
All you need to rent is first and last and sometimes not even that. To buy a home you need a large down payment and for those trying to get by it can be difficult to come up with it.
Shorter Term Commitment
You have a much shorter commitment when you rent. This means that you aren’t locked into living in a place. You can come and go as you please after giving notice and that is very important to some people.
Less maintenance and repair costs
When you own a home all the costs are on you. When you rent it is all on the owner. That keeps your monthly expenses low and consistent. For those on a tight budget or trying to get out of debt that sort of consistency is very appealing.
The Cons
You are paying someone else’s mortgage
This is probably the biggest con. When you rent you have no equity in your monthly payments. You are in fact helping someone else build their investment.
Monthly payments may increase
Legally landlords are allowed to raise your rent a certain percentage yearly. This means that your monthly payments will change. Make sure you anticipate this.
Your lease may not be renewed
The landlord may also decide that he/she wants to rent your place out to his/her friend. Once your lease is up there is no obligation to renew it with you and that might leave you looking to find new housing.
The important thing for anyone renting or owning a home to realize is that there are pros and cons to each. No one decision is best for everyone and many factors have to be considered when making the decision to buy. It will be the biggest purchase of your life, so don’t take it lightly.
“Buying a Home is the biggest purchase of your life, Don’t take it lightly.” – Suze Orman
Email – joe@budgetboss.ca
Follow Budget Boss on – Facebook LinkedIn Twitter Instagram Pinterest Quora