This BLOG On Advantages Of Home Ownership Versus Renting Home Was UPDATED And PUBLISHED On November 19th, 2020
Home Ownership can be less expensive than renting and come with tremendous benefits. Advantages Of Home Ownership Versus Renting is countless.
In many cases, the security deposit can more than the down payment required for a home purchase
Landlords ask for two months security deposit plus first months rent which can be equivalent to costs in buying home
Besides the down payment, there are closing costs that come with any home purchase
In this article, we will discuss and cover Advantages Of Home Ownership Versus Renting Home.
Closing Costs Required On Home Purchase
Closing costs are the following: one year’s insurance premium, escrows, title charges, attorneys fees, appraisal, home inspection, and other costs associated with a home purchase and getting a mortgage loan
How about closing costs?
There are closing costs on a home purchase but keep in mind that the closing costs can be paid by getting a sellers concession and if the seller is not willing to give a sellers concession, the lender can cover all or most of the closing costs by a lenders credit for a slightly higher rate
A sellers concession is where the home seller gives you a set dollar amount to assist with the home buyer’s closing costs
If the home buyer wants to net $200,000, the home seller and home buyer can agree to inflate the purchase price to $205,000 and give the buyer a $5,000 sellers concession towards the home buyer’s closing costs
The drawback is that the home has to appraise out but most cases, it all works out
In most cases, the home buyer does not have to worry about closing costs
This is because if the sellers’ concession does not cover all of the home buyer’s closing costs, the lender can give the home buyer a lender’s credit towards closing costs to offset the shortage.
Appreciation Advantages Of Home Ownership Versus Renting
The many advantages of home ownership versus renting include the potential of the home appreciating in value. Gaining equity in the home as well as the advantages of being able to deduct mortgage interest from income taxes is one of the greatest Advantages Of Home Ownership Versus Renting:
Homeowners do not permission from the landlord to be able to get a dog, cat, bird, or other pet, get a garden or decorating home to suit needs
Homeowners do not have to worry about the insecurity of having to move out
This is because the landlord will not renew the lease
The question is why doesn’t every renter become a homeowner?
Just like with everything else in life, for every pro, there is a con and being a homeowner also comes with responsibilities of maintaining home as well as needing reserves in the event if something goes wrong.
Repairs And Maintenance As Homeowners
Sometimes repairs can get quite costly
Renters contact their landlord if the furnace breaks down
The landlord is responsible for the costs of all repairs
Homeowners need to fix their own furnace
If the furnace is beyond repair, a new furnace can run upwards of more than $1,000
Whether it’s a simple house call from a plumber, repairs for a well and septic system, the air conditioning units running at full blast and breaking down during the summer months, the bottom line it costs money lots of money.
Advantages Of Home Ownership Versus Renting And Maintaining Home
Homeowners who own a single-family home are responsible for general maintenance like landscaping, shoveling snow during the winter months, and other duties associated with maintaining owning a home.
The will need to mow their own lawn
Do their own landscaping unless they contract a landscaping service or their homeowners’ association that covers it
When doing own landscaping, homeowners need to purchase a mower, weed wacker, and other landscape equipment
This can be costly not to mention these machines need servicing and often times may break down one or more times per season
Homeowners living in the northern region of the country where there are harsh winters, a breakdown on a furnace can cost hundreds of dollars not to mention the cost of frozen pipes as well
Imagine having long driveway the shoveling of snow involved
Or hiring snow plowing companies which will probably charge $100.00 or more per service call
Moving from a small apartment to a home, homeowners need to consider how much more in utilities they are going to pay
In most cases, renters do not pay for water and sewer service
Water and sewer bills can be quite costly
Disadvantages Of Home Ownership
Mortgage underwriters do not calculate utilities when they are qualifying a mortgage loan applicant’s debt to income ratios.
Sometimes during harsh winters, gas bills can exceed more than $300 dollars per month
Consider electric and gas bills which can easily double than renting an apartment and new home purchase is a larger home
When considering purchasing a home, the home buyer needs to not just calculate the additional costs of utilities but also consider having reserves in case if something breaks down
Older appliances break down all the time and can be quite costly replacing them
Homeowners cannot be able to just pack up their bags and furniture and move to anywhere they want.
Home Ownership comes with responsibilities
If ending up with a scumbag neighbor, they will be stuck with them until they either move out or you move out
It takes anywhere between 3 to 6 months to sell a home from the moment it is listed
Homes do not sell overnight and even if it is sold, it takes a good 30 to 60 days to close on a home loan.
Cost Of Homeownership
A home buyer needs to consider the cost of home ownership.
Even though home ownership has many advantages it also requires responsible budget planning and setting aside reserves
Insurance companies nor mortgage lenders cover repairs
You must keep in mind property taxes and homeowners association dues increase and can really cause a financial hardship on the homeowner
The truth of the matter is home buyers should be conservative when purchasing their own home and realize the cost of home ownership.
Gustan Cho is a senior mortgage expert and National Managing Director, providing direct-to-consumer advice at Loan Cabin. We are a mortgage brokers licensed in multiple states. We are experts in FHA Loans, VA Loans, USDA Loans, Conventional Loans, FHA 203k Loans, Reverse Mortgages Jumbo Mortgages, Non-QM mortgages, Bank Statement Mortgage Loans for self employed borrowers, and alternative financing.