Home Buyer's Guide

Pros and Cons of Homeownership

Homeownership presents many potential benefits to you such as growing equity, experiencing property appreciation and receiving tax incentives*. On the flip side, owning a home also requires commitment, maintenance and extra expenses which you may not know. With our list of pros and cons, First Choice Loan Services Inc. desires to give you a bigger picture of homeownership by outlining some advantages and disadvantages.

PROS

Building Home Equity

In essence, home equity is the difference between your outstanding loan amount and the market value of your home. Your home loan payment is made up of Principal, Interest, Taxes and Insurance (PITI). The portion paid to the Principal, or the amount of money borrowed on your home loan, reduces your loan balance which builds home equity. Interest is the cost of borrowing money on your home loan. Assessed by your local government, Taxes are included in the monthly payment and are collected into an escrow account. Insurance includes homeowner’s and mortgage insurance and is also placed into an escrow account. As you continue to pay off your Principal, you benefit from increased home equity, which can actually increase your personal wealth.

Home Value Appreciation

Home prices generally tend to rise over time. In many cases, the longer you stay in your home, the more chance you have of benefitting from home appreciation. While there is no guarantee of home appreciation, maintaining the condition of your home helps to retain its value and prevent depreciation, thereby contributing to your personal wealth over time.

Possible Tax Benefits

Though tax benefits vary from state to state, the interest on your home loan and property taxes may be tax deductible. By receiving such tax advantages on the cost of your mortgage, it can actually reduce your total cost of homeownership. Be sure to consult your tax advisor to maximize your potential benefits.

The Stability of Home

Monthly mortgage payments typically tend to be much more predictable than those when renting. Rent payments are subject to lease renewal and the discretion of the landlord. With mortgage payments, especially those with a fixed rate, budgeting for future needs can be much easier. You’re better equipped with the information and knowledge you need to help achieve your long term financial goals.

Making a House a Home

Unlike renting, homeowners find freedom to personalize their home to truly make it their own. Through painting a room, designing the landscape, or making other improvements, there are many ways a homeowner can make a house a home. A new home is an opportunity to lay down roots that can advance your life. Whether you’re seeking additional space for family, hobbies and social life, a shorter commute to your job, or just feeling the pride of ownership, First Choice Loan Services can help you get there.

CONS

Financial Commitment

Your monthly mortgage payment must be paid on time and in full to build equity in your home. This type of commitment isn’t for everyone. However, by taking steps now to plan your budget and understand how much you can afford on a month-to-month basis, you can feel confident in your commitment to homeownership.

Additional Expenses

Homeownership comes with many expenses that you may not have considered. While you can rely on principal and interest payments every month, there are also several expenses that can take homeowners by surprise. These can include the initial down payment and closing costs as well as monthly property taxes, homeowners insurance, potential homeowners association dues and (depending on your down payment) private mortgage insurance. First Choice Loan Services can help you to understand and prepare for these extra expenses with a personal consultation from one of our knowledgeable Loan Originators.

Maintenance Expenses

With most homes, some expenses just can’t be predicted. As opposed to renting, homeownership places the responsibility of maintenance on you. Everything from plumbing to landscaping to electric can add up. A good way to mitigate immediate maintenance expenses is to pay close attention to your home inspection before buying so that you understand any potential financial burdens you could face.

*Please be sure to consult with your trusted tax advisor