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Many young people today are dreaming about taking out a mortgage that they can hardly afford. But sometimes this sentiment, and the yearning for the sense of privacy and security, may turn into a nightmare, depression, and self-torment. Is it worth it? Are you ready to take the risk? Is it smarter to buy or to rent? Before making a final decision, both financial and emotional factors are to be considered.
Let’s look at taking out a mortgage and owning a home:
First of all, unlike the rent payments, with mortgage payments you build equity as a portion of each monthly payment goes towards the loan interest while the remainder pays the principal. Thus every dollar of principal payment represents a dollar of equity. Moreover, some tax benefits are available only to homeowners like Homestead Exemption or Federal Tax Deductions. Besides, even if you don’t consider your home as an investment property when you purchase it, at some point in your life it can become a source of income. You can rent out a part of your house, or host short-term renters via house-sharing platforms like Airbnb. And finally, the most important benefit of owning a home is that it's free. You can control your living space and feel free to make any home improvements you choose, you can paint the walls any color or you can update your bathroom and kitchen. And, of course, you have security.
On the other hand, the disadvantages of becoming a homeowner are numerous. Homeownership means that you’re sinking almost all of your savings into an asset that is difficult to sell and expensive to maintain. Equity doesn’t mean automatic profit and over time you can incur even a financial loss if you decide to sell it. This may happen if the value of property in your area goes down or remains stable, thus dragging down the appraised value of your home, as it is a depreciating asset.
Unlike many rentals, most homes aren’t sold furnished. Buying furniture is time and energy consuming and involves considerable expenses. To say nothing of upfront costs, which can constitute over 20 percent of the purchase price.
Moreover, when buying a house or an apartment you should take into account all maintenance and repair work in it. By contrast, a renter isn’t responsible for home maintenance and doesn’t bear any repair costs. If any malfunction happens, he or she just call the landlord and lets him know about the problem. It’s the landlord’s responsibility and expense.
Another issue to consider is the ease of relocating. It’s definitely easier and less costly if you rent. In case you are a homeowner, a good job offer far from where you live can become a real problem. Commuting can be too time-consuming, involves additional expenses, causes stress, and can even lead to health problems. Selling property is not less tiring, stressful and time-consuming. Though there is one more option. If you can sublet your property for example in Virginia Beach, Virginia and find apartments for rent in Buffalo NY, why not do that instead?
The decision about choosing your residence is the tough one. You shouldn’t be guided by public opinion, or the views of your family and friends. Do the thorough research and analyze the context. What is the job market in your city of choice? What are the key industries in the local economy? You need to be confident that the industry you have interest in is viable. In the modern world with the rapidly changing technologies and transformation of the world economies, there is a high degree of uncertainty. If you are planning to buy property, collect all the necessary data about the region’s development.
As you can see, the decision is not an easy one and needs further consideration. After all, owning the home is free, but someone has to pay for it.