Many people consider owning your own home the American dream, but no dream is one-size-fits-all.
While owning a home can increase your net worth, there are potential downsides as well -- additional labor, hassle and cost, to name a few. In many cases, renting an apartment in Charlotte, NC makes sense.
How can you know which is best? Here's what you need to consider:
The minuses of homeownership: Owning a home is a huge time commitment. When you rent, maintenance is someone else's problem and repairs are solved with a phone call. When you own a home, you take on the rolls of maintenance and gardener. When something breaks, you need to fix it.
Homeownership also limits flexibility. When you buy, you should plan to keep the house at least five years, because transaction costs -- agent commissions and other sales expenses -- are high. Sell too soon and you won't recoup those costs.
The pluses: One of the joys of homeownership is investing time to make it yours and make it worth more. What you can do to customize a home you own is limited only by your imagination, budget and local zoning restrictions.
The bottom line: If you want to stay mobile, if you don't enjoy home improvement projects, rent. If you're staying put and watch a lot of HGTV, buy.
The minuses: If you rent, you'll pay the first month's rent, a security deposit, and maybe a pet deposit. Buying means a down payment, closing costs, and other major expenses, not to mention the continuous repairs and maintenance expenses of home ownership.
In 2010 the average annual homeowners’ insurance premium was $909. Property taxes vary widely depending on where you live, but run from hundreds a year to thousands.
The bottom line: If you don't have the money and/or credit score necessary to buy a home, the question is moot. But if you can afford to own a home in a desirable area with an expanding population, you'll probably be rewarded financially.
One way to run the numbers is to use buy vs. rent calculators. But, while those are certainly helpful, the answer you get from a calculator will depend on the information you provide -- some of which you can't possibly know.
For example, among other variables, most calculators will ask how much the house you're buying will appreciate annually, as well as how much equivalent rent will increase over time. These are questions you cannot answer.
Buying? Don't get in over your head, keep these thoughts in mind:
- To lower the risk of homeownership, buy only what you need, not the most expensive house you qualify for. The average house in 1950 was less than 1,000 square feet. Today it's more than twice that. Remember that whatever you buy, you're going to have to furnish, heat, cool, insure, clean and maintain it.
- If you have bad credit and only qualify for a high-interest mortgage, it will cost you tens of thousands of extra dollars over the life of your loan.
- The more you put down, the less you borrow and the less risk you take.
- Finally, if you decide it's time to buy, hope for appreciation, but don't count on it. However, if the community you're living in has both expanding employment opportunities and population, prices are likely to rise over time.