Should You Own Your Home?

Should You Own Your Home? The American Dream Of  Homeownership 
Isn't Right For Everybody... Or Is It?
by John Occhi, Hemet REALTOR

When you are ready to buy your first home you will often find yourself full of anxiety , trying to determine if you are making the right decision.  You go through all of the 
  pluses and minuses of home-ownership, giving each one it's due careful consideration...

Buying a home can be one of life's most exciting and yet most challenging and stressful experiences you will ever go through.

With all of the different types of loan programs available today, it is easier than ever to get into a house. Make sure you check into first time buyers programs and different incentives that may be offered through Riverside County and the City of Hemet - or wherever you choose to live.  However, the question remains, "Should you own your own home or rent?"

Of course, there are many benefits to owning a Hemet home, but there are also just as many tradeoffs. in order to help you decide if owning a home is the right choice for you,
I've listed the pros and cons of buying versus renting.

Equity 
One of the most common complaints among renters is the discouraging feeling that you are simply throwing your money down the drain. This is typically true for the homeowner who lives in a
specific house for a long time.

However, building equity isn't an automatic universal truth. In some cases the property values are too high to start with, so the resell just won't net you a profit. In other cases, the property values don't increase at all.

Buying:  With every payment you make, you are building YOUR equity. Realize, that for the first half of the mortgage, most of each payment pays off the interest - no matter how good a rate you have. However, bear in mind, every month some part does go towards your principle. Your equity will fluctuate as the market value of your home changes - when value goes up so does your equity.  Just realize that when the market goes down, so does your equity. Over time though, history has shown us that building equity in a home is perhaps the smartest investment you can make.

Renting: You pay for a place to live, period. While you have a lease for a certain time period, you are not investing in the home. The plus side is you have no responsibility for ongoing repairs, but you are also not building equity. However, you are investing for the landlord. You are essentially making the landlord's payment and building his equity.

Monthly Payments:
In many cases, depending on the home that you plan to purchase, your monthly payments will likely be comparable to your current rent or quite possibly much higher. A common solution for many first time buyers purchase a "starter home." This is typically a smaller or an older home that can be purchased at an affordable cost. Many first time home buyers build additional equity in their first Hemet home by adding value to the home through home-improvements and renovations. As mentioned above, you can begin to build equity in this home and you can then upgrade to a more expensive home in a few years.

Buying Costs: Can fluctuate somewhat on a yearly basis if you have an adjustable rate loan.. Your payment could be fixed for the remainder of the loan, assuming you opt for a fixed interest rate. There are also the taxes and insurance which can change from year to year.  However, in California, your taxes will remain fairly table with only very slight increases, thanks to the tax payers revolt of 1978 and Prop 13.

Renting: Costs are fixed at least for the term of the lease (generally 1 year), but usually increase after the lease expires.

Up-front Costs: 
Up-front costs are without a doubt the most misunderstood aspect to the home purchase and the one that keeps most renters from even researching purchase. The perception that you must have huge down payments to purchase a home is no longer accurate in most cases today.  Today, there are many loan programs, especially for first time buyers, that will allow the financing of the costs as well as the principal, for only a few dollars a month.

Buying: Typically requires a larger investment than renting initially. However, there are many programs that require very little for down payment  With some programs, it will actually cost you less out of pocket to buy then rent!.

Renting: Usually does not require as much up front as buying, but still requires fees such as security deposit, pet deposit, 1st month's rent and possibly more.

Tax advantages: 
After building Equity, the Tax Advantages of home ownership is huge and one of the most advantageous aspects to homeownership. 

Buying: There are significant tax advantages to home-ownership. Interest that you pay on your mortgage and property taxes are all deductible. These deductions can make a huge impact on your federal and state tax returns.  Think about it - if you are paying $1500 a month towards your interest, then that means you have paid $18,000 in interest.  Now consult with your tax professional, but how much less tax would you pay every year on that $18K?  It might even make the difference in a lower tax rate for the taxes you do pay!

Renting: Renting offers no tax advantages. Only your landlord reaps the tax benefits that are available.


Other Considerations:
Maintenance: Buying: Any maintenance must be done and paid for by you. Home maintenance costs can easily average about 1% of your home's value per year.
Renting: You typically are responsible for very little maintenance and maintenance costs when you rent.

Time to Move

Buying: If and when you want to move, you will have to sell your home first and pay the costs and commissions associated with a sale.
Renting: Your only concern is fulfilling your lease.

A Place to Call "Home"

Buying: You have the right to remodel and redecorate at your discretion. You own it; you can do with it what you wish.
Renting: You have very little flexibility besides decorating the home. Carpet, wallpaper, paint, etc. are all items that the landlord will change at his discretion with little or no input from you.

Once again, this information is not intended to be the answer of final guide to every question you have on the topic, rather it is intended to stimulate your thought process so that you can ask all of the right questions of your Real Estate professional - which I would like to apply for the job.  So, please don't hesitate to call me directly at (951) 443-6259.

Now Have a Blessed Day,

John Occhi, Hemet Realtor
www.JohnOcchi.Com