First time home owner’s tips

Buying a house is a decision that is not to be taken lightly since there are responsibilities and risks involved. For first time home owners, there are also a lot of extra costs.

Pros of Buying a House

Property is an investment. Once the mortgage is paid in full, the purchaser of the property has a home to live in for good and a cash value if he or she wishes to sell.
Property prices have dropped considerably over the last 18 months in almost every country across the world, foreclosures are at an all time high, so now is possibly a good time to buy a house.

A home owner has the freedom to make any changes to the property or decorating choices without having to consult a landlord.

Cons of Buying a House

Financial costs can be a lot more than initially budgeted for, on top of mortgage repayments there are other costs such as legal fees, estate agent’s fees, stamp duty or other fees depending on country of residence.
For the free spirit who likes to move around, buying a house will tie him or her down for decades. Renting the property is a possibility, but can be risky.
Maintenance and repairs are on-going and can really add up over time.
Mortgage insurance and needs to be in place to protect against property repossession in the event of retrenchment or accidental death.
Buildings and contents insurance needs to be factored in.
If house prices fall, a home owner can be in the unenviable position of repaying a loan that is worth more than the value of the property, losing on the investment if it becomes necessary to sell.
For first time buyers, 100% mortgages are not given unless there is a guarantor. Usually a 20% deposit is required but this can be checked with a mortgage broker or lender.

Pros of Renting Property

Costs are much lower. Although a deposit is usually required upfront, this will be returned if the property is left in good condition.
Renting makes for a simpler life in the sense that it is easy to re-locate, usually a month’s notice is all that is required before a renter can move on.
Maintenance is the responsibility of the landlord.
In certain countries, like the UK more state help is given to those renting a property.

Cons of Renting Property

There is always the risk of being handed notice. Contracts usually get renewed on a yearly basis, but there is a risk that the landlord may not re-new the contract.
All money paid for rent ultimately benefits the landlord, paying off his investment in the long term. Any rental money is not retained as an asset by the renter of the property.
There may be conflict with other tenants, if sharing an apartment or house.
Some landlords may attempt to ‘cut corners’ when maintaining the property or giving attention to security, which may lower the quality of the rented accommodation.

Tips to Remember When Buying a House for the First Time:

Work out a realistic budget and factor in costs such as additional fees. A bargain purchase bought at an auction may not be such a bargain if there are major repairs that need to be done. Furniture, curtains etc. can really add to costs for a first time buyer who has perhaps been living at home previously and so do utilities bills such as gas, electricity and taxes.

Buy in the best area possible and remember that homes near schools, public transport and community facilities will be easier to sell later on. Finding a place close to work will cut down on commuting costs.

Shop around for the best loan either on line or get quotes from at least three lenders. Get the advice of a parent or friend who has bought a property themselves and who can be a guide through the house purchasing process.

Why Should People Buy a Home Instead of Renting

In an article on “Advantages and Disadvantages of Buying a Home” published in Loan Page, risk analyst and columnist J. J. Sigh pointed out that based on a number of considerations, purchasing and owning a home can be a great investment. However, other factors can also make the purchase of a home a worthless investment. Especially at this time when the credit crunch has negatively affected the mortgage industry and the value of houses are not appreciating, the following pros and cons of home ownership could serve as a useful guide for prospective home owners.

Main Advantages of Buying a Home

The benefits of going in for a mortgage can be numerous but experts have always included the following among the top advantages of self-ownership of a home as opposed to renting:

Pride of Home Ownership

Elizabeth Weintraub, a seasoned full-time broker-associate at Lyon Real Estate’s stated in her article, “Before you Buy a Home – Look at Eight Reasons to Buy a Home” that pride of ownership is the number one reason why people would love to own a home. Living in one’s own house gives one the freedom to choose preferred colours for decorations and for painting. One is at liberty to keep any desired number and types of pets. Pride of ownership is one good reason to go in for a mortgage loan.

Mortgage Equity Loans and Refinancing

Buying a house may have its own financial burden but at the same time it offers opportunities for other mortgage refinancing options. As pointed out by risk analyst and columnist J. Sigh in his Loan Page article, every monthly mortgage payment is a contribution that increases the house owner’s equity in the home. If one considers the fact that in the future, the house could be sold for a higher amount than it was bought, then mortgage payment may after all, be a long-term investment. The opportunity for a home equity loan and other mortgage refinancing options is an additional reasons why it is good to buy a home.

Security of Stay and Rent-Free Retirement

Unlike one who rents, the home owner does not worry about regular movements to new places. No worries of having to pack out at short notice because a landlord wants to sell the home. In addition, Rich Bendall, a real estate expert, wrote in “Benefits of Buying a Home” published in Ezine Articles on September 9, 2008, that once one is able to finish paying for a home, one is assured of the luxury of a rent-free retirement.

Cashing Out through Tax Deductions

Most of the interest that forms part of mortgage payments are tax deductible which benefits the one responsible for the mortgage payment.

Disadvantages of Buying a Home

Though many are those who wish to live in their own houses, owning a home goes with some challenges. The following are some of the disadvantages associated with buying a home:

Property Taxes, Insurance and Maintenance

Once a house is purchased, one has the burden of paying property tax which is usually included in the monthly mortgage payment. Insurance is required along with a home loan and has to be paid out of pocket. And once you own a home, dealing with the lawn and other forms of maintenance becomes the house owner’s responsibility.

Risk of Declining Mortgage Value

Purchasing a house is a financial investment. One may therefore loose money on a mortgage investment when the value of homes decline. Buying a home involves some opportunity cost. If monies could be invested in other ventures that may yield more profits than buying a home, then it may not be worthwhile to invest in a mortgage.