Homeownership Myths that Most Renters Believe
If you’ve been renting an apartment and believe that now is the perfect time for you to make an offer on a home, it’s likely that you already have some preconceived notions of what homeownership will be like. Even though owning a home can be highly advantageous, it’s also much different than renting an apartment, which is why you should be fully prepared before making this type of investment. This article takes a closer look at some of the most common homeownership myths that renters believe.
Myth 1: Homeownership Is Much More Expensive than Renting
The first myth that many renters believe is that homeownership is considerably more expensive than renting. It’s common for renters to look at the down payment requirements, maintenance requirements, and closing costs with the idea that owning a home can only be done by affluent individuals.
The issue with comparing rental costs with homeownership costs is that the two aren’t directly comparable. Renters don’t usually live in a unit that’s the same size as the home they would purchase.
Keep in mind that owning a home comes with numerous tax advantages that aren’t available when renting. These benefits will reduce the costs associated with homeownership and can be claimed on your annual tax return. Even though renting an apartment might seem more affordable, you don’t own anything when renting.
Homeowners are consistently building equity in their home as they make their monthly payments. If they ever decide to sell their home, this equity will become available in the form of profits once the sale goes through.
Myth 2: Renting Allows You to Avoid Paying Homeowners Insurance and Property Taxes
Another reason that many renters believe that owning a home is more expensive than renting is because they know that they don’t need to pay for homeowners insurance or property taxes when renting. Even though these expenses don’t apply to renters, it’s common for landlords to place them into the rental price that the tenant is charged, which means that renters are still paying this money.
If you’re looking to rent a home, many properties require that you purchase renters insurance, which is similar to homeowners insurance and adds to your total expenses. Even though renters insurance is usually cheaper than homeowners insurance, it’s still an expense that must be taken into account.
Myth 3: The Down Payment for a Home Needs to Be 20% or Higher
Among the most common misconceptions among renters is that a 20% down payment is necessary to purchase a home. In reality, a 20% down payment is only needed if you want to avoid the private mortgage insurance requirement that many lenders have. The total down payment you need to make depends on the type of mortgage you’re applying for, your current credit score, and the lender you’re working with.
Certain loans only require a down payment of 3%. Keep in mind that making a higher down payment will allow you to reduce your loan amount and should help you obtain a relatively reasonable interest rate on the loan.
Myth 4: Purchasing a Home is a No-risk investment
Another myth that should be discounted is that purchasing a home is a no-risk investment. Owning a home is considered to be one of the safest investments you can make. While you’ll certainly benefit from owning a home when compared to renting an apartment unit, there’s still a certain amount of risk that property values will eventually decrease.
There’s also the possibility that you’ll be tasked with paying for substantial repairs or unexpected maintenance soon after you purchase a home. Even though property values have risen consistently for well over a decade, there’s always a possibility that the housing market will crash. While this scenario is exceedingly unlikely, it shouldn’t be discarded altogether when you’re thinking about making an offer on a home.
When you’re renting an apartment, you may believe that owning a home will be more expensive than renting or that you need to make a large down payment before you’re able to be a homeowner. If you’re getting ready to start searching for a home that will allow you to build your wealth and leave a legacy, it’s highly recommended that you go into the home-buying process with a fresh mindset about what’s to come.