The home. The white picket fence. The 2.2 kids. This is the American dream, right? The only thing is that many don’t consider that home ownership isn’t always what it’s cracked up to be. We’re not saying home ownership is never a good thing but, instead, it’s something you need to consider it on a case-by-case basis. Is it a buyers’ market? Is it an ideal time in your life to have the responsibilities associated with owning your own home? There are many things that people don’t consider as we have simply assumed this was the only way to go. The thing is, it’s not always easy money. And the last thing you want your home to do is become a money pit as you’re saving to retire. Is owning your home doing more bad for you than good? Read on to consider the possibility.
First and foremost, one needs to consider the fact that “buying” a home is really a misnomer as, unless you’re part of the miniscule few who can pay for your home with cash, you’re actually taking out a loan for your home. Of course, this loan comes with interest so you’re automatically losing money right off the bat. And looking at the math if you have a loan that goes for many years can be even more depressing, as that interest can really add up.
You also have to think about the hidden costs that you’ve been experiencing that you may or may not have known about before buying your home. So many of us get so caught up in this being the dream or the ultimate goal that we forget about things like property taxes, which can add up to hundreds of thousands of dollars over the course of your loan. You’ll recoup some of this in taxes and possibly equity but that doesn’t always offset the financial damage done. Of course, all fixes are your responsibility, too, and if you have an older home, these could easily run into the tens of thousands.
What many people don’t talk about as well is that there are benefits to renting over buying. Not only do you get the convenience of having someone else take care of your property, but also there are also some financial benefits. First of all, you save on the aforementioned property taxes, which can be significant depending on your home. You also avoid having to put down a huge down payment, so this is money you have available to do other things with, such as making investments. You also have access to amenities that come with your rental so, if you’re in a period of your life in which even the price of a refrigerator could set you far back, this is a huge benefit. And, as also previously mentioned, you avoid having to pay for your own repairs. Remember how you thought that fixer-upper would be such a fun bonding experience? Hindsight is often 20/20.
Another common misconception is that homes are always a good investment. That’s not necessarily the case, especially since they appreciate slowly. And your house could very well depreciate in value over time due to its competition. As 2013 Nobel Peace Prize winner Robert Shiller told Catherine Rampell of The Washington Post, “People forget that housing deteriorates over time. It goes out of style. There are new innovations that people want, different layouts of rooms.” He goes on to note “technological progress keeps bringing the cost of construction down.” As Rampell points out, this means that your possibly old-fashioned home is now competing with newer, inexpensive ones. Ouch. The bottom line is that you might want to consider getting financial advice from someone other than your brother-in-law.
Many people buy homes because of the prestige, school systems, neighborhoods, or simply because they think they should. And, again, it’s not always a bad idea but, instead, it just needs to be pointed out that it’s not an automatic win. If you’re in a home and you’re upside down financially or if you’re simply tired of the home ownership responsibilities, you might be looking to downsize. Companies like Frontier Realty can help. They buy houses in any condition, pay cash, and can close in days if you’re in a rush to move. There are no commissions, inspections, or hidden fees! They will make you an offer and you can either accept it or go another route. It’s as simple as that.
Buying a home can be a wonderful thing but remember—it’s not an inherently good decision. Weigh the risks and other things mentioned in this article and you’ll be better off for it.
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