Are You Ready To Own a Home?
Everyone wants a home of their own – it’s the American dream. Gone are the cranky neighbors and snooping landlords. Being a homeowner gives you the freedom to express yourself and enjoy a great deal of privacy. You can do virtually anything you like with your living space and that includes cranking up your stereo and painting the kitchen walls chartreuse – if that is what you want to do. And if you're like most Americans, a home purchase is the single largest investment you’ll ever make, which someday can be sold in a deal that nets a decent profit. On average, a home’s value annually increases by about 5 percent.
Are you ready to settle down and take on the financial responsibilities and lifestyle changes that come with homeownership? Or might you be better off renting? Spend some time evaluating your near-term goals. Might a better job opportunity send you packing to another city or state? Is your income likely to remain the same, increase or could it decrease and jeopardize your ability to meet your monthly housing costs?
Homeownership is best viewed as a long-term commitment because selling a house is a costly and time-consuming endeavor. The serious homebuyer plans on staying in the house for at least two years – though that's a minimum and a better rule of thumb is at least five years. It's simply not profitable and it could be costly to buy and then sell a home within less than two years. Even if a red-hot housing market allowed you to turn a nice profit, the proceeds would be subject to capital gains taxes.
Making the transition from renting to homeownership is both exciting and challenging. The homeowner is the landlord and that means when a repair is in order, it’s up to the homeowner to either personally fix the problem or hire and oversee a contractor who will remedy the situation. The same goes for maintenance and overall property upkeep.
But for those who’re willing to take on the challenge, the benefits are many. Homeownership is a form of forced savings; mortgage interest and property taxes can be deducted from income taxes. Homeowners can rest easy knowing their housing costs will remain relatively stable (depending on the type of mortgage loan), and long-term owners build valuable equity.