Financial Education: Home Ownership

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House Renting versus Buying

Renting

What are the benefits of renting a home?

• Property maintenance is the responsibility of the landlord;
• You are only under a rental contract for one year or less, and
• You do not have other costs associated with owning a home, such as property taxes or homeowners insurance.

Renter's insurance, while not required, can be obtained from the same companies as homeowner's insurance. Renter's Insurance protects your belongings if there is a fire or theft in the apartment or home you are renting. Renter's Insurance is also generally cheaper than homeowner's insurance.

Renting also has some challenges.

• When you rent, you are not the owner of your home;
• Your rent might increase, and
• You might not be able to renew your rental contract and then will have to find a new place to live.

Owning

What are the benefits of owning a home?

• You can build equity. Equity refers to the value of the home minus the debt you owe on it. As you pay down the loan, you build up the equity.
• One of the benefits of equity is that you can borrow against it for many purposes, usually at a lower interest rate. For example, you can pay for a child or other family member's education.
• Homes generally increase in value over time, so it can be a good way to invest your money.
• Once your mortgage is paid in full, the home is yours. A mortgage is a loan to purchase a home.
• Homeownership can reduce the amount of income tax you owe since mortgage interest and property taxes are deductible, and
• You can pass your home on to family members.

Owning also has some challenges.

When you own a home, property maintenance and upkeep are your responsibility. You are also responsible for the additional costs of:

• Homeowner's Insurance
• Real Estate taxes, and
• Homeowner's association fees, in some cases. These fees pay for maintenance of the common areas and the exterior of the buildings and grounds.

When you own a home, it is not as easy to move as when you rent. You will typically have to sell or rent your home before you can afford to buy or rent another one.

It is also important to understand you can lose your home, and your investment in it, if you do not make timely mortgage payments.