We all know someone that is paying rent and is considering making that jump into homeownership. This can be an exciting step in a person’s life that allows freedom and possibly a step in building their wealth if the time is right. However, a baker can not sell you the cake without the calories and we can not sell you a home without the ins and outs of what homeownership involves and looking at the whole picture. You might be surprised to find out there are times when renting is a better choice.
While you will often see that mortgage payments are cheaper than your rent payment, there are other financial considerations to purchasing a home that goes beyond the Mortgage payment. It is important to be prepared for all of the other expenses that are present and must be done in order to maintain the home.
- Taxes & Insurance – Homeownership always has these costs and often times they are escrowed and can be made a part of your mortgage payment. IF these expenses are not escrowed, you have to have the money on hand to pay these when they come due.
- Improvements – Part of owning a home is making it your own. If you jump in ready to make improvements, be sure you are able to complete your projects. Sometimes people are surprised at the cost and time of making the improvements and projects only get half completed.
- Maintenance – Every home will have maintenance costs. Even if you had inspections, things still come up that need to be repaired. Even in new construction owners will find maintenance costs.
- HOA – Home Owners Association – not all homes have this but some do. It is important to get this paid if you do have it otherwise the fees can add up and will end up costing more.
Another consideration when deciding if you should purchase or rent is how long you will be at the property. If you are not planning on staying long term then it might not be wise to purchase a home. Equity that builds over time is two-fold; one is you are paying down your loan and secondly is the market changes/ growth. The real estate market is made up of up and down periods, but over the long run, most of the time is a steady rise. There are a number of factors that play into a market such as location (the demand changes for a location over time), and if you bought in a high market you might have to hold on to it longer to get through a market correction. Buying and selling a home also involves closing costs and fees. If these closing costs get tied up in your loan then it will take longer to pay down your home and build equity in your home.
If you are prepared for these extra costs and plan on living in the same spot for the next 3-5 years, then purchasing your first home can be an investment in your future. An investment that can start building your wealth and might be a stair step to an upgrade in the future. We can help you get started on this next step in life – just give us a call today to set up an appointment for a buyer’s consultation.
