They say there’s no place like home, but does that mean you have to purchase one to get the benefits? Just like everything else, buying a home has its pros and cons.
Pros of Buying a Home
Fulfilling a Dream
There’s a reason buying a home is considered a major part of the American Dream. It’s an impressive accomplishment that allows you to put down roots and transition to an exciting, new phase of life. Whether you opt for a traditional single-family home with a white picket fence or a modern condo with just enough space for one, buying a home means that you’ve reached a goal that millions dream of accomplishing.
Building Equity
Every dollar you pay toward your mortgage is building equity. That means you’re putting money toward something that’s increasing the value of what you own. Basically, there’s a very high chance that you could sell your home for more than you bought it for, so it’s an investment that will pay off financially. When you rent, the money you pay is still giving you a place to live, but it’s not giving monetary value back to you.
Freedom to Make Changes
Buying a home gives you the freedom to customize it (barring restrictions from an HOA). No more trying to convince a landlord to let you paint, add shelves, or remodel the bathroom. You get to create a space that reflects your style and preferences. That level of control can be extremely rewarding.
Cons of Buying a Home
Committing to Payments
When you get a mortgage, you’re making a commitment to pay a lot of money over a long period of time—15 to 30 years! While you may be in the position to make those payments now, it’s possible that your situation could change unexpectedly. You could lose your job, encounter a medical problem that makes it harder for you to afford your payments, or the market could change drastically and make it so that you owe more than your home is worth. This requires you to be okay with a certain level of risk.
Less Flexibility
When you’re renting, moving from place to place is fairly easy. Once your lease is up, you can pack up and go somewhere else—no questions asked. And, if the situation calls for it, you may even choose to take the penalties of breaking the lease and moving early. When you have a mortgage, however, moving around becomes much more difficult. True, you can still sell your home, but that’s going to require a lot more work on your part. And if you’re not fairly confident that you’ll stay in one place for a while, buying a home may not be worth the effort.
Upkeep and Repairs
Unlike a rental where you can call the landlord to fix problems for you, the repairs in a home you own are entirely up to you. Home insurance will help with the costs of some of these expenses, but it’s important to recognize that you’ll have to put in extra money and time to take care of these things. As a general rule, you should assume upkeep will cost you 1-4% of your home’s total value each year. So if you bought a $250,000 home, that would be somewhere between $2,500 and $10,000.
Time to Buy
If you think that buying a home is the right choice for you, the next steps may feel overwhelming. Don’t worry, there are plenty of resources to help. You should start by researching more about the home buying process, beginning here. Once you’re ready, look into housing prices in your area, make a plan to save up for a down payment, and talk to your bank or credit union.