If you are like most people who rent, you may have mixed feelings about buying a home. This is especially true during a recession. But if you do your research and are well informed of the market then you can take advantage of all the pros. These 23 reasons are the pros and cons against buying a home right now.
Why you should consider buying a home now
1. House prices tend to rise over time, so a house is one of the best investments you can make.
Home prices have risen 5% a year for the past 50+ years and that trend is likely to continue. During that same time, inflation was 4.5%. If you buy a home now, you’ve put your capital in a safe long term investment where it’s most likely to grow. Prices on property are higher than what they were 10 years ago. Given enough time, home values increase.
2. You’ll pay fewer taxes and save money. It pays to be a home owner! As a home owner, you can deduct the interest you pay on your mortgage from your taxable income. New homeowners tend to get the greatest tax benefit. The newer the mortgage, the higher the interest payment each month which means a bigger tax break at the end of the year.
Real estate taxes are deductible providing great benefits to the homeowner. Some homeowners may find that owning a home costs substantially less than renting a comparable home.
3. Sell your home when you please. If you are renting and your landlord decides to sell your home, you have no say. Often I meet people who have rented their home for 10 years or more to find that the owner has sold and they must vacate.
4. Sell your home and not pay capital gains tax. If you are married, you can keep up to $500,000; tax free on the sale of your primary residence. After selling you can upgrade into a larger home. You can also use a 1031 tax deferred exchange if you are selling rental property.
5. The home will be yours. Do what you want with the home. Paint it purple, have black carpet, install a pool, make a custom home theater or game room. These types of changes are often impossible when renting but when you own a home you can design and remodel as you please.
6. Interest rates are currently lower than they have been in over 40 years!
This means that home loans are currently extremely cheap!
In some areas your mortgage payment will be less than rent for the same home (even with no money down).
This price differential does not normally happen. In most real estate markets, a buyer will have to put money (20-30%) down to have “positive cash flow”.
7. You’ll have the peace of mind of owning your own home. No more worrying about crazy landlords and the usual rent increases. You’ll be able to live in your home for as long as you like, have a fixed mortgage payment each month for 30 years. Over time you mortgage payment will stay the same but the value of your money should increase.
8. Mortgage payments is a forced savings. A portion of your payment each month will go to the principal of the loan. Which shouldn’t be considered a fixed cost but instead a savings plan. You’re paying yourself by building equity. This will be extremely useful when you’re ready to retire. Imagine retiring and still having to pay rent. If you own your own home and you have no mortgage, your cost of living will be much less.
9. Pride of ownership. Owning your own home gives a person and their family a sense of security and stability.
10. Have as many pets as you want. Love your pets? Homeowners can relax and enjoy their pets without worrying about landlords!
11. No need for you to settle for anything less than the house of your dreams. Many sellers will pay for all of the buyers closing costs.
12. Insurance discounts. When you own a home, you qualify for discounts on car insurance and health insurance.
13. Rebates and tax credits. Some states are offering tax credits for home buyers. Certian active duty military can receive up to $18,000 in tax credits.
Are you ready to purchase a home? Apply for a VA loan today!
Reasons why you may not want to buy a home right now.
1. Owning a home is a responsibility. As a tenant, you have no responsibility other than to pay rent. As a homeowner, you are responsible for payments, upkeep, taxes, and insurance among other things.
2. Maintenance. As a homeowner, you are accountable for regular maintenance. While it is true that as a home owner you have the option of not conducting maintenance, it is advised to keep your property in orderly condition.
3. Liability. Having assets also means having liabilities. If you have nothing and you get sued, you have nothing to lose.
4. Mortgage payments are on your credit report. Pay late when you rent and you only have to pay a late fee. Pay late on a mortgage and you will have a bad mark on your credit report.
5. Property taxes and insurance. Even though your VA mortgage payment will include property taxes and insurance, and this total payment is likely less than rent, you will still have the obligation to pay theses as a cost of owning a home.
6. Increase of debt ratio. Having a mortgage payment may increase your debt to income ratio. A debt to income ratio will not normally include a rent payment.
7. Mortgage payments require job stability. If you do not have a reliable source of income, buying a home may not be for you.
8. Future value. Even though home prices and interest rates are lower than they have been in many years, there is no guarantee that your new home will appreciate. Although appreciation is probable it is not guaranteed.
9. Appliances will need to be replaced. When you own a home and you need a new appliance you may have to pay for replacement. The only prevention for this is if you have a home warranty. A home warranty can be extended for many many years but this is an added cost. When you are a tenant, you can call your landlord to bring a new dishwasher.
10. Termites. When you own real estate, you want to make sure that nothing will impact your investment. This includes termites. As a homeowner, to prevent termites, you may have to get a termite inspection every other year. Granted this is not very expensive, it is an additional cost.
When you objectively examine both the reasons for and against buying, it makes it clear why home ownership is not for everyone. Purchasing a home is a big decision and not one to be taken too lightly.
Did you know you can get a VA loan for million dollar house? It’s called a VA Jumbo