The Pros and Cons of Home Ownership
Whether you want a country home with a big backyard or a city loft near great restaurants and entertainment, every woman deserves a place over which she reigns as queen. The beauty of home ownership is that you have full control over your home's décor — you can knock down walls and rebuild the kitchen or whatever else you like without asking anyone except perhaps your local building inspector. And, as long as you pay your mortgage promptly, it's yours to enjoy as long as you like.
The reasons for home ownership are substantial. They include these:
Equity accrual: Your home will likely become your largest asset over time. The magic of “forced savings” — the money you put toward paying down the principal on your mortgage — increases your equity, which increases your net worth. Forced savings through home ownership may be your best — and most practical — route to accumulating a retirement nest egg.
Tax breaks: The interest and “points” you pay on your mortgage loan are tax deductible. If you pay slightly more each month on your mortgage than you would for rent, the tax breaks will probably make the larger mortgage payment less expensive.
Fixed costs: Your payments on a fixed mortgage don't increase over time. Costs of maintenance and insurance will rise over time, however.
Return-on-investment potential: Real estate has historically appreciated more slowly and with lower price volatility than stocks and bonds. However, a small down payment will magnify your returns, making even small annual increases in value very profitable.
While a home can be your largest asset, home ownership brings substantial responsibility. In addition to paying a monthly mortgage, you will face insurance, state and local property taxes, landscaping maintenance, routine house and appliance maintenance, and large, unexpected repairs or restorations. Once you own a house, it's crucial that you protect the investment, which can be costly.
Essential
Part of every mortgage payment goes to interest, which you don't benefit from, and part goes to principal, which pays down your debt. Over the first 10 years of a fixed 30-year mortgage, you'll pay between 9 and 18 percent to principal, while during the mortgage's final ten years 63 to 72 percent of your payments go to principal.
If you encounter expensive medical problems without insurance, or are unable to work for a long period of time, you could lose your home through bankruptcy, which damages your credit rating for a decade, or more, making it more difficult to borrow — and substantially raising interest rates on credit cards or any other type of loan.
As an owner, your financial tides match those of the market — occasionally ballooning up, occasionally ratcheting down, and occasionally not moving upward significantly for years. However, even in an uncertain market, if you intend to live in the home for at least 10 years and have a mortgage with payments you can afford, the timing of your home purchase is much less important.
