Weigh the pros and cons of owning a home to make an informed decision. Learn about benefits and challenges, and see if it's the right choice for you.
Owning a home is a significant achievement. In a recent poll of over 2,000 American renters, a total of 81 percent of respondents said that they would like to someday become a homeowner. But given the costs of owning a home, 61 percent expressed concerns that homeownership may be out of reach.1 Apart from the positive feeling of accomplishment and the negative hefty expense, there are other pros and cons of owning a home that are worth considering, whether you’re thinking about buying a home or have already taken the plunge.
Read on as we explore the pros and cons of owning a home, as well as some ways that a sell-and-stay transaction can be an exciting alternative to traditional homeownership.
Purchasing a home is sort of like buying a new pair of pants. You shop around for the right fit, consider any adjustments that you might need to make, and envision how your life will be different with this new thing in it. But the reality is that this process is a much larger undertaking than shopping in any retail store or even making other significant purchases, like buying a car.
The added complexity of home buying is evidenced immediately: the average search for a new home can take several months and require multiple offers, depending on the real estate market conditions.2 Then there’s the matter of securing a mortgage loan, which is a process that includes extensive paperwork in addition to credit and background checks. All in all, the journey to homeownership is an exciting one! However, reaching your end goal as a first time homebuyer will require both patience and commitment.
After you make it through the process of purchasing a home, the benefits of homeownership begin to reveal themselves. Of the many pros of owning a home, these are the most notable:
Buying a home isn’t just the beginning of a new adventure—it’s also the biggest investment opportunity many Americans will ever have. With every monthly mortgage payment, you’re keeping a roof over your head while effectively contributing to an investment fund as you accrue valuable home equity.
Assuming real estate market conditions are favorable, when it comes time to sell your home, you may end up with more money and property value than when you started. But home equity can be a valuable asset long before you decide to sell. Financial tools like home equity loans and home equity lines of credit (HELOCs) allow you to take out home loans against your home equity, helping you avoid high-interest personal loans or equally costly charges on a credit card.
While renting can sometimes feel like running in place, as you build equity as a homeowner, you can truly feel like you’re getting ahead.
There’s another advantage that homeownership offers over renting: predictability. For example, in the last few years, many parts of the country experienced double-digit percentage hikes in rent. This caught many renters by surprise, with some choosing to relocate rather than pay an inflated monthly rate. With a fixed-rate mortgage, the element of surprise is removed from the equation.
The benefit of a mostly unchanging mortgage payment goes beyond simply knowing what to expect. When your monthly mortgage payment is consistent, you can build a budget around it. This can be a strategic long-term approach to accomplishing your goals rather than having to adapt if (or when) your rent creeps up.
When you purchase a home, you’re effectively purchasing a blank canvas just waiting to become a masterpiece. The layout, furniture, wallpaper, and decorations are all up to you, giving you the freedom to make the space entirely your own.
While renting can offer some personalization, homeownership allows you full customization—buying a home means having a project to work on for as long as you like resulting in an end product that’s as uniquely you as your fingerprint.
While there’s a lot of good that comes with owning a home, homeownership definitely isn’t for everyone. Consider these limitations as you decide whether homeownership is the right path for you.
A mortgage isn’t the only cost of homeownership ,and in some cases, monthly repair and maintenance costs can become as expensive as a mortgage. According to Investopedia, homeowners should budget around $2,500 a year for maintenance and repair costs. However, when big-ticket expenses like roof replacements and larger construction projects and home improvements arise, this average can skyrocket.3
Some of these costs can be anticipated, but others (like water heater replacements and other high-dollar purchases) come by total surprise. So, in addition to budgeting for the costs of a mortgage, aspiring and existing homeowners should be sure to account for expenses associated with maintenance and repairs.
But how can you budget for something you can’t predict? This uncertainty can make it hard for homeowners to adequately plan for the future or accomplish the long-term goals a budget is meant to support. For this reason, renting can be seen as a convenient and consistent alternative as budgeting for these repairs is no longer your responsibility.
Taxes and insurance can also add to the overall expense of homeownership. But how much these will add to your bill will depend on where you live. In states like Alabama, Colorado, and Nevada, property tax rates hover around .5 percent or $125/month on a $300,000 home. In Massachusetts, however, this expense is nearly doubled.4
On the homeowners insurance front, states like Oklahoma, Nebraska, and Florida lead the pack with monthly premiums exceeding $400/month on the same $300,000 home. You may find more favorable rates in different parts of the state, but this estimate will help give you an idea of what your total monthly expenses will be as a homeowner.5
As we mentioned above, homeownership isn’t for everyone. Moreover, attributes that may be obvious pros for some may be complete cons for others. Take the stability homeownership provides, for example. Some may see this as a benefit—a cozy, familiar place to relax in, remodel, and return to each day. Others may see it as a roadblock standing between them and frequent trips out of town, moves for a job or family, and a seemingly stress-free lifestyle that renting can provide.
Think carefully about what you’re looking for in life. If you’re after freedom, you may want to explore alternatives to homeownership, like renting.
Those who choose to rent also forgo the stability that homeownership provides. As rent rises or your financial situation changes, some renters have no choice but to relocate to a different place. As a homeowner, you can grow increasingly comfortable in a familiar environment, continuing to personalize it and make it your own as the years get on.
But what about those who want to stop worrying about the cons of homeownership without leaving the home they love? Fortunately, renting a new home or owning your own are no longer the only options. Truehold’s sell-and-stay transaction allows you to keep living in your home without the limitations. Here’s how. When you sell your home to Truehold, you reap the benefits of your investment and receive your valuable home equity just as you would in any traditional sale. But rather than packing up your things and moving out, you’re given the choice to stay as a renter.
Equipped with your home equity, you can do, well, whatever you like! You can pay off debts or travel and take some time to reconnect with family and friends. You can use your home equity to fund your retirement, kick back and relax. Or you can give yourself some extra time to shop for your dream home in a familiar environment rather than looking for temporary housing. Truehold’s sell-and-stay transaction gives you the choice to live where you like and how you like, enjoying many of the pros of renting. This means you can free yourself from the responsibilities of homeownership while still being free to stay in your home as a renter. You can enjoy the stability of staying in the same place without having to worry about property taxes, essential repair costs, and the countless other responsibilities that can detract from the joy of homeownership. And if you choose to move on, you can do so without having to navigate the process of selling your home as you would if you were still a homeowner.
For all of its many perks, homeownership is not without its downsides, and not everyone will find the same level of fulfillment in the choice to become a homeowner. With that said, Truehold’s sell-and-stay transaction can be one of the best ways to get the most out of homeownership while still preserving the freedom that comes from alternative strategies.
Whether you decide homeownership is right for you or think a better way to live is out there, this isn’t a decision to be taken lightly. Truehold’s skilled advisors will take you through the ins and outs of our sell-and-stay option to help you make the best decision for your future.
Sources:
1. The Hill. 61 percent of renters worry they’ll never own a home. https://thehill.com/changing-america/sustainability/infrastructure/4526872-61-percent-of-renters-worry-theyll-never-own-a-home/
2. U.S. News & World Report. How Long Does It Take to Find a House? https://realestate.usnews.com/real-estate/articles/how-long-does-it-take-to-find-a-house
3. Investopedia. How Much to Budget for Home Maintenance. https://www.investopedia.com/home-maintenance-budget-8608913
4. SmartAsset. States With the Lowest Property Taxes in 2024. https://smartasset.com/taxes/lowest-property-tax-states
5. Bankrate. Home insurance rates by state for August 2024. https://www.bankrate.com/insurance/homeowners-insurance/states/#home-insurance-rates-by-state
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