Home ownership. It sounds both daunting and exciting, doesn’t
it? Buying a house is a huge investment, but it’s also a rite
of passage and can be a lot of fun. There are a lot of good
things to say about having a place of your own. Do your homework
before you buy: you want to be sure that the move you make is
the right one for you. You’re going to be living with both your
house and your mortgage for a long time: let us help you make
good decisions when you choose them both.
Should
You Buy or Rent?
Should you buy a home, or continue to rent? Well-meaning
friends and relatives may have told you that renting is just
"throwing money away" or that buying a house is
always the best option. The truth is that there are a number
of factors to consider when deciding whether to buy or not.
Financial Benefits
A mortgage can serve as a forced savings program. Once
you’ve paid off your mortgage, you have something to show
for all those payments, rather than just a pile of rent receipts.
Not all homes appreciate at the same rate, but real estate
normally keeps pace with or exceeds the rate of inflation,
so your investment will probably gain in value, too.
The property taxes and interest you pay on the house you live
in are both tax-deductible. Especially in the early years of
the mortgage, when you are paying mostly interest each month,
this can substantially reduce your income taxes.
With each payment, you build equity in your home and increase
your net worth. Use our amortization
calculator to see how your equity in the house grows with
each payment. As you build equity in your home, you also become
eligible to borrow against that equity. If you do, the interest
on the home equity loan may also be tax-deductible.
If you have a fixed-rate mortgage, your monthly payments
for loan principal and interest won't change over the lifetime
of the loan. Property taxes and insurance premiums will fluctuate,
but you can be reasonably certain that your income will increase
faster than your monthly mortgage payment. Rent payments tend
to increase at the same rate your pay does.
On the Other Hand…
You need a good chunk of change to start. The down payment
and closing costs you’ll need are going to be a lot more than
a standard renter’s security deposit.
When something needs repair or routine maintenance, you have
to pay for it. And it seems like there is always something that
needs repair or routine maintenance on a house.
A house is a non-liquid investment. If you need to move or
get the cash you have invested in it, you might have to wait
months for it to sell.
Use this calculator
for an analysis of financial factors that you should consider
when deciding whether you should buy a house.
Non-Financial Benefits
You can add on to a house, remodel it, and paint it.
Make all the noise and dust you want - it’s yours.
If you have kids, or are planning for them, it’s good to
have a yard and a neighborhood full of playmates.
You’ll always have a parking spot by the door.
On the other hand…
A house is a lot of work. Even if you don’t have any illusions
of handyman grandeur, you’re going to  spend
a lot of time on minor repairs and general maintenance. You’ll
be mowing the lawn, shoveling the snow, and installing the screens
in the spring and the storm windows in the fall. The time adds
up.
Deciding to buy a house is a major decision. It’s a big investment
of your money, your time, and your energy. You’ll have to weigh
the other factors and come to a decision, but your credit union
can help you
look at the financial issues. Unlike a real-estate agent, a bank,
or another lender, your credit union is not looking to make a
profit from your decision and can give you some good, unbiased
advice. Don’t belong to a credit union? Find one near you ...
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