Home Ownership Versus Renting Home Pros And Benefits
This BLOG On Home Ownership Versus Renting Home Pros And Benefits Was Written By Gustan Cho NMLS 873293 And UPDATED On February 11th, 2019
Why rent when you can own.
- There are great advantages and benefits of home ownership versus renting home
- There are many instances and cases where home ownership versus is cheaper
- Many landlords will ask renters for the following:
- two months security deposit
- where in many cases, the security deposit is more than the down payment required for a home purchase
Down Payment Versus Security Deposit On Home Ownership Versus Renting Home
- Down Payment and Closing Costs?
- There are down payment requirements on a home purchase
- Renters renting need to come up with security deposit and first months rent
- FHA requires 3.5% down payment
- Conventional Loans require 3% down payment for first time home buyers
- First time home buyers are buyers who had no ownership interest in a home for past three years
- 5% down payment for seasoned home buyers
- VA and USDA Loans do not have any down payment requirement and offer 100% financing
- Yes, there are closing costs on a home purchase
- But the thing many first time home buyers do not realize is that the closing costs can be paid by getting a sellers concession towards a buyer’s closing costs
- If the seller is not willing to give a sellers concession, then the lender can cover all or most of the closing costs by a lenders credit for a slightly higher rate
- There are many advantages of home ownership versus renting
- Some benefits are the following:
- potential of the home increasing in value
- ability to deduct mortgage interest on income taxes
- stability and security
- ability to have pets
- decorate and remodel without permission from landlord
Freedom As Homeowner
- A homeowner does not need permission from their landlord if they need to get a dog, cat, or other pet
- A homeowner does not need permission from their landlord to decorate their home or plant a vegetable garden
- A homeowner does not need to worry about their landlord not renewing their lease and needing to move out
- Then why doesn’t every renter become a homeowner?
Cost Of Home Ownership
Like with everything else in life, there is nothing for free and if something is too good to be true, it most likely is.
There are cost of home ownership.
- A homeowner cannot rely on someone to fix repairs if something goes wrong
- If there is a clogged toilet or clogged sink, the homeowner needs to contact a plumber
- A simple house call from a plumber can cost $200 or more
- If a homeowner has a well and septic system, a well replacement or major well repair can cost upwards of $10,000 or more
- Many homeowners in Florida have their air conditioning units running at full blast during the summer months
- A service call to an air conditioning specialist can cost a minimum of $500 or more
- Homeowners who own a single family home will most likely have to mow their own lawn
- Homeowners need to do their own landscaping unless they contract a landscaping service or their homeowners association covers it
- A homeowner doing their own landscaping will need to purchase a mower, weed wacker, and other landscape equipment.
- The cost of purchasing these equipment is not the only cost involved
- These are machines and they need servicing and often times may break down one or more times per season
- For example, I own a riding mow tractor and just had to spend $295.00 because the belt broke
- The belt itself was $95.00 from John Deere and the service call and labor was $200.00
- Homeowners who live in the northern region of the country where there are harsh winters, a breakdown on furnace can cost hundreds of dollars
- Frozen pipes can cost hundreds of dollars as well
- Owning a home with long driveway, snow plowing companies will probably charge $100.00 per service
- Those moving from a small apartment to a home will need to consider how much more in utilities they are going to pay.
- Most renters do not pay for water and sewer service
- Water and sewer bills can be quite costly
- Utilities are not calculated by mortgage underwriters in calculating debt to income ratios
- Also, electric and gas bills can easily double if renting an apartment and new home is a larger home
- These are things first time home buyers need to consider when they plan on buying a home
Reserves And Budgeting
First time home buyer need to consider the cost of home ownership.
- Home ownership has many advantages
- But also require responsible budget planning and having reserves
- Insurance companies do not cover repairs and neither do mortgage lenders
- Homeowners are on their own
- First time home buyers also need to keep in mind that property taxes and homeowners association dues can increase
- This can really cause a financial hardship on the homeowner
Bottom line is that first time home buyers should be conservative when purchasing their own home. They need to realize the cost of home ownership. Getting a larger home is not always better. Thoroughly go over budget and do not buy too much house where having a larger home may cost losing sleep at night.