One of the disadvantages of owning a home is the hassle of maintaining the yard and having to pay for the inevitable home repairs. Buying a home also requires a much higher initial outlay of capital than renting, and if housing prices drop, money can be lost. Other disadvantages of owning a home are the extra costs that a renter doesn’t have to be concerned about, such as property taxes and homeowner’s insurance. Additionally, a homeowner has less flexibility than a renter does if circumstances like a job transfer or family emergency require a move.
When a person signs a lease to rent an apartment or home, generally all he will pay is the first month’s rent in advance along with a security deposit. A person buying a home will pay much more. Another of the disadvantages of owning a home are the higher costs needed to buy it. A down payment equal to a certain percentage of the purchase price is often required. In addition, lenders generally charge points in addition to the interest rate, and these points may cost the buyer a lot of money.
A home buyer will also have to pay property taxes and homeowner’s insurance at the closing. These will be recurring, annual expenses. A person renting an apartment or home can call the landlord or manager whenever there is leak in the plumbing, storm damage, or other item that needs repair. The homeowner, however, will need to hire someone to fix the leak and make repairs, or else do the work himself. Yard maintenance is another expense that a homeowner must absorb by buying the equipment and doing the work himself or hiring someone else to do it.
Renters have more flexibility than homeowners when they have to move. If the move takes place before the lease expires, the renter may be able to sublet the apartment to another for the duration. Some landlords allow renters to leave without penalty under special circumstances. A homeowner, on the other hand, will have to put the home on the market and hope it sells quickly. If the home doesn’t sell, the homeowner may be paying for two residences for an indeterminate period.
It is often said that real estate is a good investment. Although it is true that property is an investment, only time will tell whether that investment is good or bad. Just as there can be benefits, there are also disadvantages of owning a home, so each person must weigh all of the pros and cons and decide whether buying a home or renting is the best choice for his wallet and his lifestyle.