The Pros and Cons of Buying a Home
By Shelley O’Hara
- Tax breaks, equity and other advantages
- The financial commitments of homeownership
- Maintenance and other considerations
Home ownership is part of the American Dream, and the pride of owning your own home is surely one of the intangible benefits you’ll receive when you make this big commitment. In addition, home ownership provides several other advantages, including:
- Tax breaks. When you own a home, you can take several deductions on your income tax. These deductions vary depending on your situation, but often you can write off all or part of the mortgage interest, real estate taxes paid, costs associated when you buy the home (such as interest points paid), and possibly other costs. If you work from your home, you can also write off a portion of other home costs such as utilities. It’s best to check with your accountant for a clear understanding of what you can and cannot deduct on your taxes, especially for home offices.
- Equity. When you purchase a home, you usually accrue monetary value in the home. At the start, most of your payments go toward interest, but some go toward the actual principal (the home). The longer you live in the home, the more equity or value you accrue. While not true in all cases, many times home values increase. That means when you sell your home, you often make a profit from the equity you have built up. You can also borrow against the equity in your home with a home equity loan. You might, for instance, use your home equity loan to remodel your kitchen.
- Privacy. Depending on the home type, you may have more privacy in a home. You can’t pick your neighbors, but at least you don’t share a wall or ceiling and floor with them. Of course this isn’t true if you rent a single family home (where you may have a yard and/or fencing) or purchase a condo (where you might share walls, ceilings and floors).
- Personal style expression. With a rental, you are often limited with what types of changes you can make. If you own your home, you can express your style inside and out. Want to paint your house pink? Go ahead. Add a basketball hoop to your garage? No problem. Because you own the home, you don’t need permission from anyone — unless you live in an area where the home association sets certain rules for changes to the home. For instance, your home association may not approve of pink as an outside color choice. In one Indianapolis suburb, for example, you aren’t allowed to hang clothes outside to dry! When you purchase your home, you will be made aware of any restrictions on modifications you can make to it.
- Remodeling. In addition to making cosmetic changes to your home, you may also make construction changes. For instance, if you love your neighborhood, but have a teeny-tiny kitchen, you may opt to remodel and expand the kitchen rather than purchase another home. Like cosmetic changes, any remodeling may be subject to approval by your neighborhood association.
Like Dorothy said in "The Wizard of Oz," there’s no place like home! Of course, it’s not all roses and lollipops; you’ll find some drawbacks to homeownership. Let’s take a look at what you can expect on the “con” side of owning your home.
Buying a home is a serious financial commitment. With a rental, you can leave when the lease is up, or even break the lease and move out early. With a home, you can’t decide one day you just don’t want to pay for it and move to Alaska to live off the land. You must continue to make payments or sell the house. Also, not all homes increase in value, so if you planned on using your home as a financial investment, consider the risks. In addition to financial commitments, you also have home maintenance to consider. Your landlord isn’t going to come over and mow the lawn or fix the leaky roof. You are responsible for the upkeep of your property.
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