ADVANTAGES OF HOMEOWNERSHIP VS RENT
The monthly payments on your mortgage are similar to savings plan. As you reduce the principal balance on your loan, your ownership interest in the property grows. This ownership interest is called equity. As your equity increases, you can borrow against it to make home improvements, provide a college education for your children, or for other future plans.
As a homeowner, you will be entitled to additional tax deductions you do not currently enjoy as a renter. The most important deduction will be the mortgage interest you pay. You will also be able to deduct your property taxes. These deductions may considerably reduce the amount of income taxes you pay.
Owning your own home means no more disturbances from neighbors walking above, or the children in the apartment next door. Your home will be your castle.
Without a landlord any longer, you will be able to decorate, make changes and improvements to your home to make your environment more comfortable for you. As a new owner in the community, you should also develop an interest in the neighborhood where you live to protect your outside environment.
If you purchase a home with a fixed interest rate, your mortgage payment will never change. If you remain in the home for thirty years and continue to reduce your principal balance, you will have no mortgage payment at the end of the loan term.
The increase in value of your home as you continue to own, is called appreciation. Appreciation, like equity, can also provide you with funds for future plans.
Your home may also be left as an inheritance for your children or other family members.
DISADVANTAGES OS HOMEOWNERSHIP VS RENT
As a homeowner, you will have sole responsibility for all maintenance and repairs. This may include plumbing, electrical work, painting, a new roof, appliance repairs, etc.
Once you purchase a home, moving to a new location may be difficult. You must either sell your home or rent it and assume the responsibilities of being a landlord.
Your monthly mortgage payment could be higher than you are currently paying for rent. In addition to your mortgage payment, you will also have to pay for property taxes, homeowners' insurance, upkeep, maintenance and repairs, and utilities you may not be currently paying as a renter.
Foreclosure is the sale of a mortgaged property (your home) by the lender when the borrower fails to make monthly mortgage payments on a timely basis or otherwise defaults on the mortgage. A mortgage represents a large financial obligation extending over a long period of time. Financial institutions can and do foreclose when borrowers fail to keep up their payments. This can result not only in the loss of your home, but also in the loss of your investment and good credit rating.