First Time Home Owner's Tips

Pros and Cons of Purchasing Versus Renting a House

Jul 30, 2009 Fleur Hupston

Understanding current market conditions can help in that all important decision of whether to purchase a home or continue to wait while renting.

Buying a house is a decision that is not to be taken lightly since there are responsibilities and risks involved. For first time home owners, there are also a lot of extra costs.

Pros of Buying a House

Property is an investment. Once the mortgage is paid in full, the purchaser of the property has a home to live in for good and a cash value if he or she wishes to sell.
Property prices have dropped considerably over the last 18 months in almost every country across the world, foreclosures are at an all time high, so now is possibly a good time to buy a house.
A home owner has the freedom to make any changes to the property or decorating choices without having to consult a landlord.

Cons of Buying a House

Financial costs can be a lot more than initially budgeted for, on top of mortgage repayments there are other costs such as legal fees, estate agent's fees, stamp duty or other fees depending on country of residence.
For the free spirit who likes to move around, buying a house will tie him or her down for decades. Renting the property is a possibility, but can be risky.
Maintenance and repairs are on-going and can really add up over time.
Mortgage insurance and needs to be in place to protect against property repossession in the event of retrenchment or accidental death.
Buildings and contents insurance needs to be factored in.
If house prices fall, a home owner can be in the unenviable position of repaying a loan that is worth more than the value of the property, losing on the investment if it becomes necessary to sell.
For first time buyers, 100% mortgages are not given unless there is a guarantor. Usually a 20% deposit is required but this can be checked with a mortgage broker or lender.

Pros of Renting Property

Costs are much lower. Although a deposit is usually required upfront, this will be returned if the property is left in good condition.
Renting makes for a simpler life in the sense that it is easy to re-locate, usually a month's notice is all that is required before a renter can move on.
Maintenance is the responsibility of the landlord.
In certain countries, like the UK more state help is given to those renting a property.

Cons of Renting Property

There is always the risk of being handed notice. Contracts usually get renewed on a yearly basis, but there is a risk that the landlord may not re-new the contract.
All money paid for rent ultimately benefits the landlord, paying off his investment in the long term. Any rental money is not retained as an asset by the renter of the property.
There may be conflict with other tenants, if sharing an apartment or house.
Some landlords may attempt to 'cut corners' when maintaining the property or giving attention to security, which may lower the quality of the rented accommodation.

Tips to Remember When Buying a House for the First Time:

Work out a realistic budget and factor in costs such as additional fees. A bargain purchase bought at an auction may not be such a bargain if there are major repairs that need to be done. Furniture, curtains etc. can really add to costs for a first time buyer who has perhaps been living at home previously and so do utilities bills such as gas, electricity and taxes.

Buy in the best area possible and remember that homes near schools, public transport and community facilities will be easier to sell later on. Finding a place close to work will cut down on commuting costs.

Shop around for the best loan either on line or get quotes from at least three lenders. Get the advice of a parent or friend who has bought a property themselves and who can be a guide through the house purchasing process.

Related Articles on Home Ownership:

Buying Foreclosed Properties- What to Look For

Joint Mortgages Make Home Ownership Affordable

Why Use the Services of a Mortgage Broker?

The copyright of the article First Time Home Owner's Tips in Investment is owned by Fleur Hupston. Permission to republish First Time Home Owner's Tips in print or online must be granted by the author in writing.

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