This was originally published on Monday, July 3, 2017, in the Pacific Daily News. Click here to subscribe to the PDN.
Question: I am considering purchasing my first home. I have been saving up and ensuring my credit score is good enough to be given a low interest rate. This is a big financial step and I want to make sure that I am making the right decision. Do you have any pointers to help me make a sound decision?
You are correct; buying a home is a huge financial undertaking. Homeownership is not for everyone and you have to be certain that you are ready for the long-term responsibility. There are always two sides to the coin — the pros and cons — which need to be taken into consideration before making the decision to be a homeowner. Before we get into buying a home, let’s first discuss a few advantages of renting a home:
Flexibility: In today’s economy, many people struggle to make ends meet. We are never sure where life will take us next.If you fall on hard times it is easier to pack up and move without the stress of breaking free of an expensive house. Renters have the option to downgrade into a more affordable living space at the end of their lease.
Repair and maintenance costs: One of the largest advantages of renting vs homeownership is there are no maintenance costs or repair bills. If your air conditioner stops working or your roof starts to leak, you do not have the financial responsibility for the repairs. You don’t have to spend your weekends fixing clogged pipes. As a homeowner, you are completely responsible for your repairs and maintenance – which can be quite costly.
Special amenities: If you rent an apartment or condo, and even some homes, you likely live in an area that is landscaped. As a renter you may have access to amenities such as a swimming pool, fitness center or playground. If a homeowner wants to match these amenities they can expect to pay thousands of dollars in installation and maintenance costs. Similarly, condo owners may need to pay monthly fees to pay for access to these amenities.
More cash on hand: Renters do not have to pay additional costs such as taxes, homeowners insurance, repairs and maintenance expenses.If a renter obtains renter’s insurance, it is much more inexpensive than homeowner’s insurance. Depending on the size of your rental unit, and the agreement you have with your landlord, your utility costs may be covered with your rent. Apartments and condos are smaller than homes and are usually less expensive to cool.
When purchasing a house with a mortgage, you may be required to have a sizable down payment. Renters however, do not have to have to save up a lot of money to move into a rental property. While the exact amount varies, the total amount is significantly less than you would need to buy a house.
Safety from market fluctuations: Property values go up and down. When the country went through the latest recession, many homeowners were left owing more than the value of their homes. Numerous experts believe that the market has recovered but the number of foreclosures still seems to be quite high.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at firstname.lastname@example.org and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.