The Pros and Cons of Homeownership
Anyone familiar with basic psychology will know that â€˜safetyâ€™ is the second tier from the bottom in Maslowâ€™s famous Hierarchy of Needs.
12:42 09 May 2017
Anyone familiar with basic psychology will know that ‘safety’ is the second tier from the bottom in Maslow’s famous Hierarchy of Needs. Safety includes many things, but a safe and secure shelter is a basic need of all humans. Only once our basic needs are met and we have a safe shelter, food, and drink, can we nurture a family, build self-esteem, and realize our dreams.
For decades, home ownership is something middle-class families have worked tremendously hard to achieve. Before the 2008 recession, 75% of white Americans owned their own home compared to 59% of Asian Americans and 47% of African Americans. Since then, homeownership has been in decline and many families who lost their homes to lender foreclosure are still living in the rental sector. Yet although most of us do aspire to own a home, it is not all a bed of roses.
There are a number of pros and cons to think about before you work towards realizing your dream of owning a property. It is very important that you consider each of the following points, as you may just discover that home ownership is not for you.
The Advantages of Owning a Home
There are a number of advantages to owning a home, which is why so many of us take the plunge. Review the following list and see how many of them apply to your current situation.
When you own your own home, it belongs to you and you are not obliged to let anyone cross the threshold. It’s a very different story if you rent an apartment or live with friends or family. In those circumstances, your home does not belong to you, so you are not guaranteed privacy. Whilst a landlord is now allowed to enter a rental home without making a prior appointment, he or she does have the right to enter in an emergency or because an inspection is due. In addition, if you share a home with other tenants, you won’t have any privacy at all.
There is a greater sense of security that comes from owning your own home. Landlords can kick you out with as little as one month’s notice, leaving you homeless on a whim. This is not a nice situation to be in, especially if you have children to take care of. When it’s your home, nobody can kick you out and as long as you keep up with the mortgage payments, you have a home for life. Moreover, even if you are struggling to pay the mortgage, the lender has to follow a strict protocol before they foreclose, which gives you extra time to find somewhere else to live.
The costs of homeownership are relatively predictable. You are free to fix your mortgage costs for two to five years, whereas a landlord can hike the rent whenever he or she feels like it. Predictable costs make it easier to create a budget and plan for the future.
Property normally increases in value over time. If you buy a home, you can reasonably expect it to make you a profit when you eventually come to sell. This is a major advantage of property ownership and it is why some many people end up well off when they buy properties at the right time. Properties in up-and-coming areas often double their value within a few years. However, it is possible to lose money on property purchases, as many people found out when they bought at the height of the property boom and discovered that a couple of years later, their homes were worth less than what they had originally paid for them.
A Finite Debt
Most mortgages terms are 25 years. This means that in 25 years’ time, assuming you make regular payments on a repayment mortgage, you will own your home outright. It is a nice feeling knowing that one day your home is all yours. Once this happens, nobody can take it away from you and you will always have somewhere to live.
A Greater Sense of Community
Homeowners enjoy a greater sense of community. In neighborhoods where the majority of people rent a home, there is less of a community. People come and go. They don’t put down roots, so they don’t make an effort to build community ties or get involved with local community projects. Homeowners are different. They know they will be around for the long-term, so they actively get involved in local projects, join groups, and take care of their community. For families, this is a good thing, as it means the neighborhood will be safer and more child-friendly.
The Disadvantages of Home Ownership
Whilst owning a home is the dream of most people, there are some important disadvantages to consider. Think carefully about the following points before you put a down payment on a home, or it could backfire on your in spectacular fashion.
Renting abdicates you of any maintenance responsibilities unless it says otherwise in your tenancy agreement. Owning a home is a different kettle of fish. As a homeowner, you are advised to implement a program of regular home maintenance. This includes, but is not limited to, painting external woodwork, cleaning out the downpipes and gutters, internal painting and decorating, hiring Go-Forth Pest Control of Burlington to eradicate any pest infestations, and having appliances serviced at least once a year. A failure to do any of these things could negatively affect the value of your home and be disastrous for your health. The problem is that home maintenance is expensive and hiring professionals to carry out maintenance work is something to factor in. Can you afford the extra costs? If the answer is “no”, now is not a good time to buy a home.
You are Stuck in One Place
Once you have a family, the security you get from owning your own home is a major bonus, but for young people, renting a home affords them a desirable of flexibility. Not everyone wants to be tied down to a mortgage and home. Jobs change, relationships come and go, and if you prefer to flit from one place to another, following your whims, home ownership is not for you. Instead, enjoy the gypsy lifestyle for a few years, travel the world, and have fun; it is what being a young person is all about! Once you have a good job, a mortgage, and a family, you are an adult, but for now, the yoke of responsibility can wait a while.
Monthly Expenditure can be Greater
Once you have factored in the cost of home maintenance, homeowner’s insurance, and other miscellaneous costs, it is more expensive to own a home than it is to rent. In the early days, when you are working low-paid jobs and struggling to juggle to pay for expensive childcare, the accumulated costs of homeownership might be a step too far. In fact, you could actually be better off living in a rental apartment where your costs are included in the monthly rental payment. For this reason, do the math and work out whether you can afford to buy a home.
The High Cost of Buying a Home
Buying a home is an expensive business. Aside from the cost of actually buying the property, there are mortgage lender fees, property attorney fees, removal costs, home survey fees, and a million and one other expenses. By the time you collect the keys from the realtor, you can expect to have paid out thousands of dollars. For anyone struggling to save up for a down payment on a mortgage, the extra cost of buying a home could be a step too far. It’s pointless dreaming about buying a home if you can barely cover the cost of your electricity bill or gas for your car.
Buying at the wrong time or in the wrong neighborhood could see the value of your home plummet. Nobody wants to get stuck with negative equity, but it can and does happen. Unfortunately, if it happens to you and your home ends up worth less than what you paid for it, it could cause you a number of serious problems. The first is that you can’t sell because the sale price won’t cover your mortgage debt, and the second is that even if you walk away, the lender will chase you for the outstanding debt.
Less Financial Aid Available
There is a wide range of state and federal welfare programs for people in need, but you may not be eligible to claim for housing costs if you are a homeowner. People living in rental housing can apply for aid to help them meet their rent payments. They are also eligible for government housing.
It is only natural that you want to buy your very own home, especially if you want to settle down and start a family. However, buying a home is a huge financial commitment, so don’t rush in with your eyes wide shut.