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Should You Buy A Home?

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Contributor:
Paul Ambrose
Paul Ambrose

With house prices what they are, many people are asking the question:  Should I buy now?  Should I buy at all?  

Let’s look at a few of the reasons to buy a home, and a few of the reasons not to. 

Forced savings

One of the biggest pros of buying a home is that it is a sort of forced savings plan.  When looked at this way, your mortgage payment is really an investment in the equity of your home, which after 25 or 30 years becomes yours. 

This is in comparison to someone who, instead of purchasing a home, takes the money and invests it in diverse stocks and bonds over the same time period.  If history is any indication, the stocks and bonds investment will outperform the home purchase over time—but it requires a fair amount of discipline to set aside that much money each month, every month, over 30 years. 

Not a lot of people have that kind of discipline—so owning a home is one way to force yourself to invest monthly.  

Home repairs, property taxes, and interest

When the faucet breaks at my house, I just call the landlord.  And that brings us to point number two:  upkeep costs.  If you own the home you live in, you also pay to fix the faucet.  Not only that, but as the owner you also pay rates, insurance, and interest on the mortgage you took out to buy the house. 

Renters only have to worry about one thing:  rent.  Now here’s where it gets sticky:  if the annual cost of all those other things is less than rent on a comparable living space, the renter comes out on top in the savings contest.  If not, the home owner is the winner.  

Permanent vs. transient

Another factor to consider is how permanent or temporary you think your current living situation might be.  Rare is the college student that knows his or her future well enough to be looking into purchasing a home at age 22. 

A less obvious situation might be an unmarried father of two who is just starting a new job—does he think this job will last?  Will this be the community they choose to live in for the next 20-30 years?  All other things being equal, the sooner you sell after a home purchase, the less you stand to benefit from the transaction, from an investment point of view. 

Conversely, generally the longer you hold on to the house, the more you stand to gain.  

Non-financial considerations

Although some people might not think these are as important as issues relating to money, the reality is that some of the things not related to finances at all can be very important when considering whether or not to purchase a home. 

If you are someone who likes to decorate, especially in ways that would not be easily removable (i.e., by installing elaborate indoor shelving units), then renting a home may not be the best choice for you.  On the other hand, if you can’t stand cooking, gardening, or even staying at home—why then, purchasing a home may be just a big money drain.  

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