Taking the Big Leap

You have a nice little apartment. You just got a promotion at work and things are going well. But in the back of your mind, there's a niggling question: Should I keep renting, or should I think about buying a house?

You tried weighing the decision. On the plus side, renting gives you the freedom to move without the worry of selling a home first. You don't make repairs or pay property taxes.

On the down side, renting seems transitory, and you can't get around the fact that every monthly rent check is just money circling the drain.

Then you consider the pros and cons of buying a home. On the plus side, when you make a mortgage payment, you are building equity. And that's an investment. Owning a home also qualifies you for tax breaks that might support your other financial responsibilities. But factoring in home upkeep expenses and hassles, you wonder if owning a home is really worth it.

You've come to a proverbial crossroads. If you can answer “yes” to these questions, you are probably ready to buy your own home:
  • Do I have a steady source of income?
  • Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
  • Do I have a good record of paying my bills?
  • Do I have few outstanding long-term debts, like car payments?
  • Do I have money saved for a down payment?
  • Do I have the ability to pay a mortgage every month, plus additional costs?

Here are a few benefits to owning a home you might not have considered:
  • The U.S. government allows tax incentives that make it possible for many homeowners to exceed the standard yearly deduction. There are also tax deductions for the yearly interest paid on your primary home. This amount equals a big chunk of your total payments for the first several years. Also, you can deduct the total amount of your annual property tax bill.
  • When you own a home, your monthly payments can change if property taxes and insurance go up, but increases usually happen gradually. Rental fees can sometimes be more unpredictable.
  • No one can make guarantees, but over time, most real estate increases in value. If you are careful about your selection, and you treat the home kindly, it will likely be worth considerably more in five years than it was the day you bought it.
  • Even though interest makes up a good portion of your monthly payment, especially during the first years, the amount paid toward the principal increases each month. Appreciation and equity work together, helping you to use your initial investment to “trade up” to a more valuable home if you choose.
  • The house is yours. You are the only person with the power to allow anyone to enter the house to inspect it. You can paint it and decorate it any way you wish. Put nails in the walls to hang pictures and artwork. Bring home a pet without asking anyone if it's allowed. It belongs to you.