Homeownership is a large commitment, so the risks associated with homeownership are important to weigh in when deciding whether to become a homeowner now or at some other time in the future.
What are the risks? While every situation is different, here is a list of risks that all homeowners should consider:
- Monthly housing expenses may be more than rental expenses. The amount you commit to paying for housing each month may be more if you're paying a mortgage versus paying rent. In addition to paying for the home itself, you also will be expected to pay for property taxes, insurance and other expenses you probably did not have to pay for while renting. Thus, even if your monthly mortgage payment would be the same amount as your current monthly rent payment, buying a home may be more expensive than continuing to rent.
- You are the landlord. When you commit to owning a home, you become the landlord. That means, if something breaks or needs to be repaired, you pay for it. In addition, you are now responsible for other expenses as part of owning a home, such as paying property taxes, association fees, utility bills, and insurance, the costs of which may increase each year.
- You may need to sell your home to move. If you decide to move, you may need to sell your home. Depending upon market conditions in your neighborhood or state, your home may not sell as quickly as homes in other areas.. In addition, you may need to incur the expense of hiring a real estate agent to assist you in selling your property.
- Property values can remain flat or decline. The value of your home, starting from the price you paid for your property, may remain flat or fall over time. A property can lose its value for a number of reasons, such as changes in the local or national economy, if your home is not well maintained, your neighbors' homes are not well maintained, etc. If and when you decide to sell your home, you may not obtain the same amount you paid for it, and you may owe more than what the property is currently worth. As a result, you may be unable to move or may have to use savings to pay off the difference between the amount you receive from the sale of your home and the balance of your mortgage loan.