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Is Homeownership Right for you?

Is Homeownership Right For You?

You may think you would like to own your own home, but have you carefully weighed the advantages of homeownership against its disadvantages? Below are some of the things to consider when thinking about owning a home versus paying rent.

Building Equity

Equity is the portion of your home’s value that you own “free and clear.” Equity is calculated by subtracting the amount you owe on the home from the home’s actual value. Home equity can help secure future loans for college, major home improvements, or business needs. For many, paying rent is a transitional phase until the renter can afford his or her own house. Renters do not build up the financial security that comes with home equity.

Tax Benefits

Homeowners can deduct their mortgage interest every year from their taxes. Borrowers should consult a qualified tax advisor to determine their specific tax benefits. Renters do not receive tax advantages.

Home Maintenance

Homeowners are responsible for any and all repairs to the home. A homeowner should be able to make a house payment and still have money left over for minor repairs. Savings to cover major repairs—such as plumbing and electrical work—is also a must. This increased responsibility gives homeowners the freedom to make changes to their homes, provided that they follow building codes, local zoning and neighborhood covenants.

Renters have fewer financial responsibilities for maintaining appliances, repairing their homes, or keeping up the condition of the exterior and interior of the residence. However, renters are also limited in their ability to alter their housing to their needs or desires.


Often, first-time homebuyers have to wait quite a while before they can afford to purchase amenities for their homes. Renters sometimes enjoy greater amenities, such as swimming pools, exercise rooms, cable television, party rooms, kitchen appliances, etc.

Up-Front Costs

Homeowners should be prepared to pay 3.5 to 5.0 percent of the home price on closing costs and down payment. If homeowners want to break even from these costs, they should plan to stay in the home at least three to five years. In addition, the first year or two of a person’s mortgage are usually the toughest. Often, it is during this time that the majority of a new homeowner’s cash is tied up paying for rehabilitation, repairs, or furnishings. Renters do not need as much money as homeowners to move into a home. A typical rental deposit does not exceed one month’s rent, and is therefore considerably less than the 3.5 percent of the sales price on a house that is often required as a down payment.

Monthly Housing Costs

Housing costs for homeowners with fixed-rate mortgages will remain stable over time, providing stability and predictability.

Through amended or renewed lease agreements, landlords can increase the rent on a regular basis. This can be an issue in real estate markets where rental costs are high or rapidly increasing.

Market Risks

Homeowners experience greater financial risk due to real estate market fluctuations, increases in property taxes, etc. Renters are less impacted by fluctuating real estate markets. The market may result in increased rent, but landlords cannot increase rent before negotiating another lease. In comparison, a homeowner can money if the real estate market fluctuates greatly.

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