To Buy or not to Buy - That is the Question

By: Kelli Bennett

In 2004, statistics told us that one in ten American residents owned a second home. Home ownership had reached an all time high of 70%.

Alas, now the figures tell a different story. By the end of 2007, home ownership had taken the largest, single, year on year dive since the records began in 1965. Now home ownership across the nation is down to 67%.

The latest mortgage crisis and the constant news of continuing foreclosures may cause some deep thinking about home ownership. What are the advantages of owning versus renting? While each of us has different needs and wants, many of the pros and cons to be considered are common to all of us:

Perhaps the biggest 'pro' in home ownership is the fact that it is easier to lead your own independent life. There can still be neighbors from hell, but at least they are further away than the next balcony! Ownership will likely boost self-esteem and pride as buying your own place is often considered to be one of life's milestones.

If you have children they may be able to play in their own back yard.

Eventually your money will accrue in your favor, whereas rent never does.

One advantage is the tax relief you can claim against the interest on your mortgage. Another advantage that could also involve the tax man is the probable profit you will make on your home. The IRS are fairly lenient in this respect.

If your home has risen by more than $500,000 (per couple) you will be liable for capital gains tax. However, most homes slip under this bracket, and so the equity that can be accrued in the house is all yours. In the last ten years, the price of homes has almost doubled, so the profit could be sizeable.

Many people happily make the sacrifices involved in spending all their money on their home when they are young. This is because they want to feel secure in their own home in their old age. If a home can be paid off while you are still able to work, it will mean your financial outlay will be less, as a pensioner.

One of the big changes when switching from renting to owning is the fact that you take on the responsibility for the maintenance and repairs. This must be a con! Surprises can cost money - money that isn't budgeted for. Surprise repairs will also take up your time. The freedom of calling in the 'block manager' for repairs is no more; you will be painting your own walls!

Cash is definitely a factor - you will probably have less of it in your pocket. Even before you have moved in, there is the matter of actually paying for the purchase of the home, as well as paying for the home itself. Legal fees, closing costs and moving charges can mean that you will move into your new home almost penniless! The addition of house taxes is one more bill that you didn't have to pay as a renter.

Home owning will tie up a lot of cash; you will not have so many liquid assets. However, it could be argued that a home can be used as collateral against a loan.

Finally, it is more difficult to re-locate when you have a home. So with all this to consider, why do well over half the population struggle to get their first home?

Well, there are four factors which weigh heavily in the balance of home ownership. One is that it is very fulfilling to feel that your money is eventually going towards your own fortune. Another is that it is very re-assuring to know that your old age may be easier if you struggle while you are younger. A third reason is that you have your own roof over your head. No-one can terminate your lease as long as you pay the mortgage. Finally, that equity stash that home owners seem to have when they are older and about to sell up is sure tempting! Pass the paintbrush.

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