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Big decision, right? Other than popping the question to your one true love, buying a home is probably one of the most important decisions you’ll make in your lifetime. You’re going to need to do some serious research, and learn a TON of stuff. But that’s okay – I’ve got your back! We’re going to start out with the basics, and work our way through this process together. First up: is buying a home right for you?

Everyone needs a place to live, and you more or less have two options – you can rent, or you can buy. There are advantages and disadvantages to both – so let’s explore those options! We’re going to break it down into four sections – the advantages and disadvantages of renting, and the advantages and disadvantages of owning a home.

RENTING – ADVANTAGES:

• You have the freedom to move or downsize when you want, once the lease expires.
• You have the ability to put your money into other investments with potentially higher gains.
• You don’t have to maintain the property.
• You may have fewer expenses that might be paid by the landlord, i.e. utilities.
• There is no major down payment required, except for the deposit.
• Your rental payment may be lower than a mortgage payment.
• You don’t have to pay real estate taxes, such as property taxes.
• Your rental may have free amenities, such as a pool or a gym.
• Studies have shown that a disciplined renter can build as much wealth as a homeowner.

RENTING – DISADVANTAGES:

• You may be paying more in rent than you would in a mortgage.
• You have no equity when you’re renting – there is no ownership or wealth creation; all your rent money goes to the landlord.
• The payments never stop when you’re renting – with a mortgage, eventually you own your home
• Rents will increase likely over time, once your lease expires.
• You have to deal with a landlord or property management company – want to paint a wall? Tear one down? Get a new fridge? Sometimes it can be tricky.
• There are no tax advantages to renting.

If you’re considering buying a home for the first time, chances are that you’re already familiar with the above advantages and disadvantages of renting, because that’s what you’ve been doing for a while now. So let’s take a look at the pros and cons of home ownership next.

OWNERSHIP – ADVANTAGES:

• You can build home equity and wealth. It’s really the biggest investment most people make.
• Your house, your rules – no landlord. Paint that wall, build that deck!
• As long as you’re smart with it, a mortgage can improve your credit score.
• You have the ability to borrow money against the value of your home (a home equity loan).
• Eventually, there are no more payments once the mortgage is paid off (in the long term).
• There are no capital gains taxes when you sell your primary residence.
• It’s a kind of insurance against inflation – the house increases in value as the dollar decreases in purchasing value over time.
• Paying your mortgage every month (or two weeks) is a ‘forced’ savings plan, so you become more financially responsible.
• When you sell your home, you can use the proceeds to buy a bigger, better home, one that fits your lifestyle needs over time.

OWNERSHIP – DISADVANTAGES:

• There is a sizeable down payment required depending on your choice and income level.
• Home prices can lose their value in a tough economy.
• Not everyone qualifies for a mortgage, and obtaining one can be a hassle at times
• In addition to your mortgage payment, you’ll have to pay property taxes and get homeowner’s insurance as well.
• There are significant legal and closing costs on buying a house.
• Mortgage payments can rise with interest rate increases after the term.
• Maintenance costs can be excessive, depending on the age of the home.

So there it is, all laid out for you. The decision is yours – but first, to help you decide, ask yourself these questions:

1. Are you financially stable? 
2. Do you have the financial skills and the self-discipline to make a home purchase work?
3. Are you aware of ALL the costs and responsibilities of being a home owner?

If the answer to the above three questions is ‘yes’, and you feel that the advantages of home ownership outweigh the disadvantages, then buying a home may be right for you. In part 2 of this Home Buying 101 series, we’ll explore the financial side of home ownership, and help you understand if you’re financially ready to own a home.

Thanks for reading!