Advantages of Buying a Home Over Renting

Many people are caught between the dilemma of whether to buy a home or rent one. The answers are not easy because each individual’s situation is different, and the answer may also vary depending on the prevailing market rates for buying and renting at any given point of time. However, with the real estate rates at fairly low levels at present, buying a home offers a much superior opportunity in many ways over renting for a majority of people.

Sense of Ownership

Almost everyone has a dream to have their own home someday. Owning a house gives a sense of permanence and ownership to a family. For many homeowners, the value of owning a home and the peace of mind that comes with it is priceless. Apart from the financial advantages, there is an inherent sentimental value attached to owning a home, which cannot be assessed in monetary terms.

Sense of Financial Security

When you own a home, it becomes a long-term financial security for you and your family. It is a safeguard against the future uncertainties of inflation and other economic conditions. If the construction costs and rentals rise unexpectedly in the future, a homeowner remains unaffected by such sudden conditions.

Tax Benefits

In many cases, the interest payments on the home mortgage and even the real estate tax amount may be deductible from your income tax. Therefore, if you pay installments on your home rather than paying monthly rentals, you can build your own home without too much burden on your financial capacity.

Potential for Capital Appreciation

If you have purchased your home during dull market conditions when the prices are hovering at low levels, chances are that you may benefit in terms of capital appreciation over a period of time. A prudent investment can enable you to accumulate or earn a sharp and considerable return, which you cannot expect in case of a rented home.

Better Financial Planning

If you have taken a fixed rate mortgage, you know exactly how many installments you will be required to pay in the future for what amounts. You can plan your monthly budget accordingly and maintain proper and appropriate control over your finances. This may not be possible so easily in case of the rental option because the rent is not in your control once the term of rental agreement is over.

Enhanced Credit Opportunities

Homeowners usually have a better advantage when they need to apply for loans in the future. A homeowner can build equity over a period of time, and borrow against that equity when necessary. Credit card companies and other private lenders typically favor homeowners for the disbursement of credit and loans.

Private Mortgage Insurance *

If the down payment on your home is below 20 percent of its sale value, you can get a private mortgage insurance (PMI) with your lender. PMI helps you to acquire a mortgage with a lower down payment because it protects the lender against any default on your loan. PMI offers an excellent advantage to people who wish to own a home rather than rent one, but do not have substantial finances available for a larger down payment.

Resource:

* http://www.bankrate.com/finance/mortgages/the-basics-of-private-mortgage-insurance-pmi.aspx

Buying a Foreclosed Home: Advantages and Disadvantages

So you’ve finally decided on buying your dream home, but have a small budget. You can still buy your dream home by buying a foreclosed home. Foreclosure is the legal process of recovering the loan balance from a borrower who has stopped making payments.

How to buy a foreclosed home?

If you’ve decided on buying a particular foreclosed property, speak to the owner and negotiate a deal with him. You can buy the property for a good price as the owner of the property will be looking to pay off his loan amount.

You can also buy a foreclosed property from the lending agency who has taken over the property after a particular grace period. Banks auction off foreclosed properties in quick time.

Do your homework before buying a property

Like most important purchases, you should do a thorough research on the property. Understand how the entire foreclosure process works, and also attend a few foreclosure auctions to get a hang of the process. Learn about the market value of the property and also about the history of the property.

Advantages

– Foreclosed homes come with a huge discount and you can buy a foreclosed home for around 25% lesser than the market value.

– Since there are numerous projects coming up, the prices of homes that are foreclosed have decreased even more.

– As the home is already built, you can move in immediately.

– You can confidently buy these homes without worrying about the legality of any of the documents as they would have been checked by the bank.

– Most foreclosed homes are quality homes in good residential areas.

– As you are buying a home from a government recognized financial institution or a bank, the seller can be trusted.

– You can complete the entire transaction in less than two months.

Disadvantages

– You do not get any warranty on foreclosed homes.

– As you are buying the property as-is, there may be many repairs and modifications that you may have to make. The previous owner may not have had money to pay his loan payments on time, so he may not have had any money to pay for repairs, either.

– The bank will also not give away any history of the property or the condition of the house.

– The previous owner may have had other debts like property tax or maintenance charge, which you may have to pay if you want buy the foreclosed home.

– Calculating the value of a foreclosed home can be a hard task.

– You may also have to pay utility bills like electricity bills and water bills.

– Banks may not offer you a loan for a home that is foreclosed as there may be legal problems in the property.

– You may have to pay the purchase price of the property only by cash. This can be an issue if you cannot get a loan from a bank.