Many young families contact me asking for first time home buyer tips. My stock answer to them is: “Are you sure you want to buy and not continue to rent?” Even though I feel strongly that buying is more prudent economically, I also know that the decision to buy has to be made at the right time and for the right reasons. So I invite all of the first time buyers to consider the following.
Pros and Cons of Renting:
– Less up front cash required then buying.
– You can pick up and move at any time.
– You are not responsible for maintaining the property, like fixing leaks.
– You are probably paying off someone else’s mortgage and creating wealth for someone else.
– Your rent and lease terms are determent by the landlord.
Pros and Cons of Ownership:
– You now have tax advantages. Part of your interest, property taxes, and even some repairs can now be a deduction when you file your income tax. I recommend to always check with your accountant or tax advisor to get more facts.
– Your equity (Equity= represents the portion of your property that you own debt- free and is an important factor in creating personal wealth) increases with every mortgage payment you make. By owing less to the lender you are building equity and financial wealth.
– You now own something you can sell or leave to your heirs.
– Depending on the economic conditions, property values appreciate or increase in value thus increasing your equity.
– Buying a house requires up front cash for down payment and closing costs.
– Your overall monthly housing expenses will probably increase
– You now have the responsibility of maintaining the property in case an emergency arises.
– You can lose the property to the bank if you do not keep up with the payments.