Sooner or later most people at some point in their lives consider the purchase of a home as opposed to renting. However, there are those that simply have no desire of home ownership due to the life styles they have or for the simple fact that home ownership just does not appeal to them.
Home ownership benefits
In the United States, home ownership is a prevailing line of thought for most people in this country.
The purchase of a home that one can afford allows the build up of equity by the payment of the monthly mortgage and the appreciation of the home’s value over time. Equity in a home is the actual value of the home that the homeowner owns beyond the amount due on the mortgage.
Typical homeowners end up upgrading the type of the home they have over the years as their needs change. For example, many first time homeowners acquire a condominium and then sell it if they get married and start raising a family, have the need for more space or a location nearer to better schools. Owning your own home or some other property and maintaining them or improving them gives the property owner a sense of accomplishment and pride of ownership.
Owning a home or other real property in this country also has tax advantages that do not come with renting. Homeowners can deduct on their federal and state tax returns property taxes paid for their properties as well as the interest paid on their mortgage. If the property is a commercial property, improvements can be deducted or depreciated over time which creates a savings for the property owner.
Additionally, the appreciation over time of real property and the build up of equity in a parcel can provide benefits for one when they retire and no longer are working on a day to day basis.
The biggest advantage of home ownership is a sense of stability for the property owner and his or her family. Meaning, by owning a home as opposed to renting a home, the chances of uprooting and moving is generally reduced. As one suspects, moving repeatedly is a trying thing especially for children who do not understand the reasons.
Disadvantages of home ownership
The biggest disadvantage of home ownership that this country is presently experiencing is the decline in property values where many people who bought their dream home four or five years ago have discovered that they owe more on their property than what it is currently worth due to the current economic recession. Declining value is the biggest disadvantage of home ownership followed by physical problems with the home requiring significant repairs (and not covered by insurance).
If you rent a home, you typically are not responsible for any repairs of the rental as a result of natural disasters or the need to maintain and repair unlike the homeowner. The homeowner, however, is required to pay for unexpected costs such as a new stove or roof.
Depending upon where one lives, being a homeowner is typically more expensive than renting. Mortgage payments are generally greater than rent and home ownership includes the additional costs of insurance, property taxes, repairs and maintenance (inside and out).
Another disadvantage of home ownership is that by owning a home, your ability to move out of the area for other opportunities such as a better job is much more limited due to considerations of other family members as well as timing issues for selling the home.
The worst part of home ownership is exactly what we are seeing in this economic recession. Property values have significantly declined where many homeowners now owe more to their lender on their mortgage than what the home is worth. As a result there is little incentive of many property owners to continue paying on a mortgage that exceeds the home’s value. The result is that many homeowners simply walk away from their homes primary because they can no longer afford to pay its monthly expenses.
As a result of the inability of a home owner to pay the home’s expenses where a foreclosure results, property values in the areas where the foreclosures occur increase further complicating the downward spiral of home value.