Pros And Cons Of Buying A House: The Ultimate List
Lauren Nowacki6-minute read
January 10, 2022
You’ve heard it said before: Buying a home is a big deal.
While the advantages of buying a home can be alluring, there are some disadvantages you’ll need to consider to make sure you’re truly ready for the responsibility. To help you make your decision a little easier, we’ve come up with a list of some of the most common – and sometimes ignored – pros and cons of buying a house.
The Pros Of Buying A House
There are many emotional and financial benefits of owning a home. Here are just a few ways you can take full advantage of all the good that comes from homeownership.
Investing And Building Equity
Many people see a home as an investment. That’s because you can build up home equity, which is the amount that’s left after you subtract your mortgage balance from the current market value of your home. For example, if your home is worth $100,000 and you owe $50,000 on your mortgage, you have $50,000 in equity.
Your home equity can grow as you pay down your loan balance and if your home appreciates in value. And homes typically appreciate, though it may depend on location and the state of the housing market. According to U.S. Home Price Insights, home values increased 18% from October 2020 to October 2021.
If you’re renting a home or currently own one and wish to see how much equity you currently have (or could have if you owned it), use our home value estimator and subtract your monthly payment from the result. Keep in mind that this is an estimate, so the numbers are not exact. This is especially true if you are a renter and you’re not paying the exact mortgage amount.
Homeowners can receive tax deductions on certain home expenses. These may include mortgage interest, property taxes and essential home improvements, like installing medical equipment and safety devices. These would be itemized tax deductions and homeowners should review state and federal laws to see what qualifies.
As you continually make your monthly mortgage payments on time, your positive payment history can help raise your credit score. Another way a mortgage can help increase your score is by adding more diversity to your credit. A good credit mix shows lenders that you’re able to handle different kinds of debt.
Houses are typically more spread out than apartments, condos and townhouses. Most homes have a yard, and you likely won’t be sharing a wall with strangers. That means you’ll have more privacy, fewer noise complaints and more outdoor space that’s just for you to enjoy. While you may still have nosey neighbors, it’ll be a lot harder for them to get all the dirt when you have more space – and maybe even a fence – between you.
Control Over Your Space
Unlike renters, homeowners have more freedom over their space. Since they own the home, they can decorate, renovate and maintain it however they want. They won’t have to worry about pet policies or security deposits. The only limits are those set by your lender, local laws and codes and a homeowners association (HOA) if you’re part of one.
Rent is likely to fluctuate with landlords as the cost of living rises. But homeowners with a fixed-rate mortgage can expect the same payment on their principal balance each month. However, it’s important to remember that if the homeowner is paying into an escrow account, that payment may fluctuate as property taxes and homeowners insurance costs may increase or decrease annually.
Eventually, you could own your home free and clear, meaning you’ll no longer have to make mortgage payments to anyone. If you choose to rent for the rest of your life, you’ll always have a monthly payment.
Buying a house is commonly associated with the American dream, and many new homeowners often feel a sense of pride and accomplishment for hitting this milestone. A home can bring stability into one’s life and can be a place where you and your loved ones feel safe, warm and comfortable. It’s also a place of your own where you can host parties, build a family, celebrate holidays and create memories.
The Cons Of Buying A House
While homeowners can take advantage of the many benefits of buying a home, there are also a few drawbacks that prospective homebuyers should be aware of before jumping in feet first.
There are several costs associated with buying a home. One of the most popular – and costly – is the down payment. While you’re not required to make a 20% down payment, even the required 3% – 3.5% minimum is typically in the thousands. For example, if you’re purchasing a $200,000 home, your minimum down payment could be $6,000 – $7,000, depending on your loan. And if you don’t put down at least 20%, you’ll also need to pay private mortgage insurance (PMI).
In addition to the down payment, you’ll also be required to pay closing costs, which are fees that are charged to complete your real estate transaction. They’re due at closing and typically range from 3% – 6% of your home’s purchase price. In the example above, you’d pay an additional $6,000 – $12,000 in closing costs on that $200,000 home.
Time To Build Equity
While home equity can be a major financial benefit of owning a home, it does take time to build it. You can build it slowly but surely as you pay down your mortgage balance. You can speed this process up by making extra payments to your principal balance. Or start with more equity in your home by making a larger down payment when you purchase the home.
While the market is hot now, it can cool, requiring more time for home values to rise. You can increase your home’s value by making renovations or adding certain features. Of course, this will cost money to do.
As mentioned above, the housing market fluctuates. These can be a disadvantage if you’re buying a home in a seller’s market. That’s because you may have to deal with competition with other buyers and higher listing prices. You may have to wait it out.
For homeowners trying to sell their home, a buyer’s market can be a big disadvantage. Because there’s more supply than demand, you may have to deal with competition with other sellers. This may mean your home will sit on the market for longer or sell for less.
Time Isn’t Always On Your Side
Those wanting to enjoy the benefits of owning right away really need to consider just how long it takes to buy a house. Not only can the decision to buy a house and the home search take longer than expected, but so can the financial preparations needed to ensure you’re in a good position to buy a home and afford the upfront costs, maintenance and repair fees and other regular home expenses. That brings us to our next disadvantages of owning a home.
Maintenance And Repair
People often focus on the upfront costs of buying a home, including the down payment and closing costs, but there are several costs of homeownership that should also be considered. Along with day-to-day expenses, like cleaning and utilities, there are also maintenance and repair costs. And depending on the problem, they can be expensive. If you have roof issues, water damage, plumbing or HVAC problems, you’ll likely spend thousands of dollars to fix them.
Property Taxes And Other Regular Fees
Along with maintenance and repairs, there are reoccurring costs associated with owning a home. Property taxes are typically paid semiannually, depending on where you live and how much your home is worth. As a mortgage holder, you’ll also need to carry homeowners insurance, which can cover your home from damage and liability. Your lender will usually roll these costs into your monthly payment.
There’s also the money you pay regularly to run the heat, electricity and water. And if you’re part of a homeowners association, you’ll also pay HOA fees.
When you become a homeowner, you make a long-term commitment to a location and house. Renters are typically tied to a lease that runs anywhere from 6 months to a couple of years. Even then, they may be able to break the lease with usually minor financial impact. As a homeowner with a mortgage, you can’t just break it early – unless you pay it off. Typically, this would be done with the sale of the home. The proceeds from the sale first go to paying off the mortgage on the home. However, before selling, you should live in the home for a few years to pay down your mortgage, build equity and recoup the money you spent on closing costs when purchasing the home. You’ll also need to live in the home for at least 2 years to avoid capital gains tax when they sell.
Homeownership Pros and Cons At A Glance
Here’s a quick view of the pros and cons of buying a house.
Invest and build equity
Takes time to build equity
Can help increase your credit score
Property taxes and other recurring fees
Privacy and control over own space
Responsible for the work and cost of home repairs
Feeling of accomplishment
Less flexibility to move
The Bottom Line
While there are some disadvantages to owning a home, for many people, the good outweighs the bad – especially when it comes to the emotional impact homeownership has on their lives. If you’re ready to find your dream home – and see all that homeownership has to offer, let a Rocket HomesSM agent help you start your home buying journey today.
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