The American Dream Of Homeownership Isn’t Right For Everybody… Or Is It?
Weighing the pluses and minuses of homeownership…
Being a First Time Home Buyer can be one of life’s most exciting and yet one of the most challenging experiences you can go through. With the numerous loan programs available to consumers in New Jersey today, it is easier than ever to get into a house. However the question remains, “Should you own your own home or rent?”
There are many benefits to owning a home in Northern New Jersey but there are also just as many tradeoffs. To help you decide if owning a home is right for you we have listed the pros and cons of buying versus renting.
Equity
One of the most common complaints among renters is the discouraging feeling that you are simply throwing your money down the drain. This is typically true for the homeowner who lives in a specific house for a long time. However building equity isn’t an automatic universal truth. In some cases the property values are too high to start with so the resell just won’t net you a profit, and in other cases the property values don’t increase at all.
Buying: You build your equity with every payment made. For the first half of the mortgage, most of each payment pays off interest. However every month some part does go towards your principal. Your equity will fluctuate as the market value of your home changes. Over time though, history has shown us that building equity in a home is a smart investment.
Renting: You pay for a place to live, period. While you have a lease for a certain time period, you are not investing in the home. You are not building equity. The plus side is you have no responsibility for ongoing repairs. However, you are investing for the landlord. You are essentially making the landlord’s payments and building his or her equity.
Monthly Payments
In many cases, and depending on the home that you plan to purchase, your monthly payments will likely be comparable to your current rent or quite possibly much higher. Many first time buyers purchase a “starter home.” This may be a smaller or an older home that can be purchased at an affordable cost. As mentioned above you can begin to build equity in this home and you can then upgrade to a more expensive home in a few years.
Buying: Costs can fluctuate somewhat on a yearly basis over the first few years due to escrow adjustments. After this initial adjustment period, your payment could be fixed for the remainder of the loan assuming you opt for a fixed interest rate.
Renting: Costs are fixed at least for the term of the lease (generally 1 year) but usually increase after the lease expires.
Upfront Costs
Upfront costs are possibly the most misunderstood aspect to the home purchase and the one that keeps most renters from even researching purchase. The perception that you must have huge down payments to purchase a home is no longer accurate in most cases today.
Buying: Typically requires a larger investment than renting initially. However there are many programs that require very little for down payment, i.g., FHA, FHA 203k, USDA and VA
Renting: Usually does not require as much up front as buying but still requires fees such as deposit, pet deposit, first month’s rent and possibly more.
Tax advantages
One of the most advantageous aspects to homeownership.
Buying: There are significant tax advantages to homeownership. Interest that you pay on your mortgage and property taxes are all deductible. These deductions can make a huge impact on your federal and state tax returns.
Renting: Renting offers no tax advantages. Only your landlord will reap tax benefits that are available.
Other Considerations:
Maintenance
Buying: Any maintenance must be done and paid for by you. Home maintenance costs average about 1% of your home’s value per year.
Renting: You typically are responsible for very little maintenance and maintenance costs when you rent.
Time to Move
Buying: If and when you want to move, you will have to sell your home first.
Renting: Your only concern is fulfilling your lease.
A Place to Call “Home”
Buying: You have the right to remodel and redecorate at your discretion. You own it; you can do with it what you wish.
Renting: You have very little flexibility besides decorating the home. Carpet, wallpaper, paint, etc are all items that the landlord will change at his discretion with little to no input from you.
I sincerely hope this information will be of value to you in making one of the biggest decisions of your life.
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Please contact us at 201-943-6800 to schedule your FREE No-Obligation Consultation where we will meet to tailor a program to fit your needs and comfort level for monthly payments and investments.
If you would like to get started now please fill out a Secure Online Application and we will contact you to set up your free consultation and get you into the home of your dreams with the best terms available…regardless of your credit!
I hope you have enjoyed this blog.
Until next time,
Tony
P.S. Also, make sure you register for our Insider Mortgage Secrets, browse our HomeBuying Resources section and fill-out a free no-obligation secure online application or call our Edgewater, New Jersey office in Bergen County at 201-943-6800 with any questions you have.
P.P.S. CLICK HERE to check out our FREE Credit Repair Program.
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