The American Dream is the goal of homeownership. This decision has many factors to consider before making this life-altering choice. You could do more harm if you take this step before really considering the pros and cons involved.
Homeownership has its own set of positives and negatives to think of. The same goes for renting. We will go over some of these points below:
Pros of Owning:
- Mortgage interest is normally tax-deductible
- Freedom from landlords and superintendents, which means much more privacy
- The potential to build equity if the market goes in a positive direction
- If you have children you will have the comfort of knowing which school district they will remain in
- The ability to make improvements that will make your home more enjoyable and give you the possibility of increasing equity
Cons of Owning:
- The possibility of losing equity if there’s a recession or market decline
- You will need much more money for a downpayment and closing costs
- There will also be ongoing maintenance costs to keep your home in good condition (painting, maintenance of heating and cooling systems, plumbing repairs, etc…)
- Other costs such as real estate tax (as we know Long Islanders pay more tax than most other US residents) and homeowners insurance
Pros of Renting:
- Freedom of movement. If you don’t like your neighborhood or neighbors you can more easily move. It’s also great if your career requires relocation.
- A much lower cost to get into an apartment and no big down payments (they are normally 20%). There is also much less red tape compared to buying. You will normally need other professionals when buying, such as a lawyer to help with the closing.
- You will not have to worry about major repairs or maintenance.
- No property tax (NYS has high property taxes versus other states)
- You can also build your credit if your landlord reports the payments to the credit bureaus
- Avoid the risk of price declines (negative equity, a situation many faced in 2005 and on. These owners could not refinance due to being underwater)
- Lower utility costs – a house has a bigger footprint and may have an oil burner. A typical oil delivery can be in the hundreds of dollars.
Cons of Renting:
- You can’t build up equity
- There are no tax benefits (Solar credits etc…)
- There can be rent increases that are out of your control (after your lease term ends). It all depends on the landlord. They may even sell the property you live in
- You might have to relocate multiple times until you find the right living situation
- You might not be able to live in your dream location if there are no vacancies
As you can see there are advantages to each option, and each choice has its caveats. The decision greatly depends on your personal circumstances. In general, if you are young with a lack of funds and are not set in your career, renting is a great choice to make. On the other hand, if you are older and want to start a family and build equity in the long run, owning is a great way to go. Of course, these may be generalities for your situation. We recommend you make a list and go over each pro and con for yourself in order to make a logical decision based on your actual circumstances. We wish you luck with this big life-affecting decision.
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