Home ownership is one of those goals that most of us would like to be able to say we accomplished during our lifetimes. Having a home of one’s own is a source of pride and a symbol of financial stability and success for people the world over.

At the same time, the decision about whether you should purchase a home or continue to rent for the time being is not merely an emotional one: it has a number of important financial and strategic implications, as well.
Of course, there are very few people who go out and actually purchase an entire home with cash. Rather, purchasing a home for most people really means borrowing a large sum of money from a bank in the form of a mortgage, which is usually paid back to the bank over a 30 year period – with interest, of course.

It has always been common wisdom that – if given the chance – you should always buy a home instead of rent. However, the answer to whether you should buy depends upon a number of factors.

Advantages and Disadvantages Of A Mortgage

The advantages of buying a home through the taking out of a mortgage include:

1. When you buy a home, you have the ability to build equity. This means that, each year that passes, you will own more and more of your home (and your bank will own less and less). Home ownership is a great investment vehicle.

2. Getting a new house via a mortgage also means you will be paying interest payments each month. These payments add up to a lot of money over the course of the year, especially when your mortgage is new. The good news, however, is that you get to write off these mortgage interest payments, deducting them from your taxable income and allowing you to pay less in taxes to the government.

3. Having a house of your own means pride of ownership and a sense of stability. You also have a lot more flexibility than you do in a rented home, apartment or condo in terms of how you decorate the inside, outside and yard of your residence.

Still, taking out a mortgage is not always the best option for everyone, and there are some disadvantages, including:

1. When you are only planning to live in the place for a relatively short time (say, less than 12-18 months), it makes a lot more sense to rent rather than buy in most cases.

2. If the home values in the area where you plan to live have been falling lately and show no sign of hitting bottom yet, it might be smart to rent for a bit longer rather than taking out a mortgage on a new home now.

3. As you know, the number one factor determining the interest rate you pay on your mortgage is your credit score. If you have a poor credit (FICO) score, you will not be eligible for a low interest rate at this time. This means that you will have to a significantly higher monthly mortgage payment. And, you will pay up to tens of thousands of dollars more in interest to your bank over the life of a 30-year mortgage. If you do have a low credit score, it may be a smart move to continue to rent for a while longer while you work to raise your credit score.

The decision to rent or buy a home is an important one. Use the advantages and disadvantages shared above as guidelines to determine the right move for you.

Author Bio: Find out how to raise your credit score fast and effectively – often within 60 days or less – at: http://www.37-Day-Credit-Plan.info.

Category: Real Estate
Keywords: Advantages And Disadvantages Of a Mortgage,To Own or Rent a Home,home values in your area