Family, friends, everyone’s adamant you should buy a home because, well, they’ve done it and now they’re preaching to the unconverted. But is it the right decision for you? Before you rush into home ownership it’s a good idea to weigh up all the pros and cons so you can make an informed decision. Let’s look at some of the positives and negatives of buying your first home.
Pro: You get your own space
Flatting with other people is a lot of fun….when you’re 25, when you’re 35 it can start getting bit old. The idea of a home of your own is really appealing when you’re dealing with cranky landlords, putting up with other people’s annoying habits and never having the lounge to yourself.
Con: Is it the right time to buy?
When you buy a home current personal circumstances often take priority but it’s also a good idea to take into account what you want in a couple of years from now. Renting for a longer stretch is a more strategic move and cost-effective if it means you can buy a larger home. Firstly you can save a larger deposit, and secondly you avoid the associated costs of buying and selling a home twice.
Pro: Get a foot on the equity ladder
The argument for buying your first home sooner rather later is a good one because you’ll start building equity. Within five to seven years you can have a decent amount of equity in your home, especially if you can make higher payments on your mortgage, make improvements that add value and house prices increase.
Con: It can be more expensive than you think
When you rent the set up costs are taken care of if you move into an established flat. Plus you don’t have to worry about repairs, that’s the landlord’s job. With a first home you suddenly take on more responsibilities, and mortgage payments are the least of them. Some of the hidden costs you need to factor in when buying a home can include:
- Insurance set up
- Phone/internet set up
- Power connection
- Window treatments
- Replacing carpet
- Repairs & renovation
- Landscaping improvements.
Pro: You can take advantage of tax benefits
There are certain tax incentives to buying a home, namely being able to write off all your mortgage interest against your income. Until recently this applied to mortgage debt of up to $1,000,000 but tax reform bill has halved this to $500,000. With the median house price in Minnesota according to Zillow at just over $240,000, it shouldn’t be too difficult to buy a home with a mortgage of less than $500,000 and reap the tax benefits.
Con: What if your circumstances change?
Technology has enabled the world to move at a faster pace today than a generation ago. There are more opportunities to be mobile and a home can be a millstone around your neck. What if you get a great job offer in a different state? What if you decide to go traveling for a year as a freelancer? If your circumstances change you need to think about Plan B and if you’re ok with being a landlord or selling at a loss.
Still not sure if home ownership is right for you? Check out these 21 Hints You Are Ready to Buy Your First Home.