Personal Finance

Should You Buy a Home?

Dream of hanging your hat on a rack that you own? Purchasing a home is a financial decision and an emotional one - and buying at the wrong time or for the wrong reason can mean a big mess. Here are factors to consider before you sign that dotted line.

Less flexibility. When you rent, your lease probably runs year to year, giving you the option of moving. When you buy a home, plan to live there at least five years. Eventually selling your home may also take longer than you expect, again granting you less flexibility to move.

Your time and hard work. If you're like most new owners, you'll spend a lot of time maintaining and improving your home no matter its condition when you move in. This sweat equity often increases your home's value, but also means that much of the day-to-day maintenance falls on you. In addition, professionals' fees for some of the work can become a major expense.

Additional costs.Insurance , property taxes , repair charges: These expenditures can be quite costly and far outweigh the mortgage payment increasing your monthly charges far above the cost of renting.

Homebuying among all age groups surged in recent months. And despite reports that fewer millennials (those born between 1980 and 2000) are buying now, many young adults still dream of owning a home. A Zillow survey reveals that more than 80% of renters age 18 to 34 are "confident" or "somewhat confident" in eventually being able to afford to buy a home. Slightly more than a third expect they'll buy a home within the next year; more than half expect to own within just the next five years.

Buying a home does bring benefits:

Improvements. Not only will many landlords prohibit you from making significant changes to your rented home, but any changes you make that increase the value or appeal of the property will benefit the landlord. Better you improve your space and increase the value for your own payback, financial and otherwise.

Home values tend to increase. Though real estate certainly suffers periodic downturns, the return on your initial investment when the time comes to sell will be yours to keep. Just remember that the gain may be less than you anticipate after such expenses as broker commissions and closing costs.

Financial equity. Unlike rent, mortgage payments usually remain stable. Each monthly payment also decreases the amount of your mortgage to the point where you eventually pay off the loan. This equity is paramount as you age and can constitute a major asset when you retire.

Tax benefits. Your mortgage interest and property taxes reduce your annual tax liability; points you pay to obtain a mortgage can also be deductible. In addition, in many instances selling your home incurs no capital gains tax depending on your age and how long you lived there.

Emotional aspects. Many people have roots and memories closely associated with the family home. The local school system looms large if you have young children, and bear in mind that the neighborhood will be yours for a long time after you buy.

When the time comes for you to own a home ownership, know that your decision fits your individual needs. Home is where your heart is.

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Maureen Crimminsis the co-founder of Crimmins Wealth Management LLC in Woodcliff Lake, N.J.Her websites are www.CrimminsWM.com and www.RootsofWealth.com .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.