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Tip of the Week

Weighing Your Options

Buying a home is a major decision that shouldn’t be taken lightly. You should take the time to consider the pros and cons of both renting and buying, before take on a mortnage. Homeownership isn’t for everyone. Sometimes renting is the smarter financial decision. Weigh your housing options to get an idea of costs involved to see what fits in your budget and makes the most sense for you.
 

Renting

Advantages
• No Maintenance Is Required.
• It’s Easier to Move. If you are not settled into your career or could have an opportunity to relocate in the near future, it is much easier to switch to a month-to-month lease or sublet than it is to sell your home.
• You Can Avoid Owning a Depreciating Asset. While home prices have stabilized and are rising in most housing markets, there’s no guarantee that your home will increase in value over time.

Disadvantages
• Your Monthly Payment Can Increase.
• You Don’t Build Equity. When you rent, your housing payment provides you with a place to live, but will not provide you with an asset to sell when you are ready to move.
• You Don’t Receive Tax Benefits. Homeowners can deduct their mortgage interest payments and their property taxes from their federal income tax, which reduces the final cost of homeownership.
• You Can’t Paint or Remodel Without the Owner’s Approval.

Buying a Home

Advantages
• You Can Build Equity. Historically, homes rise in value anywhere from 4% to 6% per year. Even if your home doesn’t increase in value, though, you’ll be building equity as you pay down your mortgage as long as your home maintains its value.
• You Can Take Advantage of Tax Breaks for Homeowners. Homeowners can deduct their mortgage interest payments and property taxes when they itemize their federal income taxes. These deductions offset the cost of your housing.
• Your Housing Payments Will Stay Stable. If you choose a fixed-rate mortgage, your principal and interest payments remain the same for the duration of the loan.
• You May Be Able to Use Your Home as an Investment. If you buy a home and choose to leave it, you can rent it out rather than sell and generate income.

Disadvantages
• You Have to Pay for Your Own Maintenance. As a homeowner, you must spend time and money keeping your home in good repair. You need to set aside funds for unexpected expenses, such as appliances that break, a service contract on your furnace, or the need to replace your windows.
• You Must Pay Property Taxes. Property taxes can go up, making your home less affordable.
• Your Home Could Lose Value. As many people have learned the hard way, there’s no guarantee that your home will increase in value over time.
• Buying a Home Requires a Cash Investment. You need to use up your savings for a down payment and closing costs and for other expenses of homeownership. That cash won’t be available for other investments.
• Homeowners’ Insurance Is Mandatory If You Have a Mortgage.
 

 

 

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Montana Credit Unions for Community Development (or MCUCD) is the award-winning, charitable arm of the Montana Credit Union Network. A state-wide nonprofit organization, MCUCD works together with the state's credit unions to improve the lives and financial independence of all Montanans.