5 Things Every Renter Should Know Before Buying

Buying a home can be financially rewarding, but it also has its challenges. Many renters can’t wait for the day when they’re able to get the keys to their own house. Ownership can provide a sense of stability, giving you full control to decorate and remodel as you like. But before buying, it’s important to know exactly what you’re getting into. Some people start the homebuying process with rose-colored glasses, or they feel the experience will be far better than renting—and sometimes, it is. At the same time, you need to be realistic and understand that buying might be more expensive and time-consuming than renting.

1. Profits aren’t guaranteed

Some people buy a home because they’re tired of wasting money on rent. Rather than put money in a landlord’s hand each month, they purchase a home to build their own net worth. Unfortunately, there’s no guarantee that buying a home will be financially beneficial.

If you purchase at the right time, your property may appreciate a little each year, which increases your equity, and you can earn a profit when you’re ready to sell. But sometimes, home prices go backwards. Rather than appreciate, property values depreciate. In a bad market, you could end up owing more than you paid for the house. And if you sell before home prices recover, you can lose money and pay out-of-pocket to sell the property.

2. Maintaining a yard takes time and money

If you lived in an apartment before buying a house, your landlord’s maintenance department likely handled the landscaping. As a homeowner, you’re responsible for your exterior, which involves mowing your lawn, pulling weeds, seeding, and fertilizing. Maybe you always dreamed of having a beautifully landscaped yard, but it takes money to maintain an outdoor masterpiece. You’ll also sacrifice your free time. According to the Bureau of Labor Statistics, the average American spends about 1 1/2 hours a week maintaining their lawns and gardens — but as a newbie, it might take you longer.

3. You might pay more for utilities

If you’re moving from an apartment to a single-family home, anticipate an increase in monthly utilities. The amount you pay for electricity depends largely on the size of the property. And if your apartment was smaller than your new home, you can realistically pay an extra $20-$30 every month. You’ll also pay more for utilities if your new home has natural gas, whereas your apartment was electric. Plus, homeownership means paying your own water and sanitation bills.

4. Your mortgage may slightly increase from year to year

Some people purchase a home because they’re tired of yearly rent increases. However, just because you buy a home with a fixed-rate mortgage doesn’t mean your mortgage payment will never change. Your property taxes can increase, which can increase the monthly payment a little each year, and if you file a claim with your homeowner’s insurance, your agency may raise your rate. Since both of these expenses are included in your mortgage payment, any increase or decrease affects your monthly payment.

5. Homeownership can slow your savings efforts

Saving money might be a priority, just know that buying a house can slow your efforts. Ownership can be financially beneficial in the long run, but in the beginning, you’ll drain your savings account buying the property, plus there’s ongoing repairs and maintenance which can cut into your disposable income.

If you’re ready to own your own place, buying can be rewarding and satisfying, but there are things you should know before you even think about starting the process. If you know what you’re getting into, you won’t have unrealistic expectations or be caught off guard.

source: totalmortgage.com

Three Ways to Start Rebuilding Your Home’s Equity

Buying a house is an excellent investment. You might plan to live in a starter home for a few years to build equity, and then move into another place using proceeds from the sale as your down payment. However, life doesn’t always go according to plan. And since there’s no way to predict the housing market, there’s always a chance that home values will decline and rob you of much needed equity.


Declining property values can trigger an upside down loan — which is when you owe more than the property’s worth. Once you’re in this situation, selling a house becomes practically impossible. Sometimes, the only option is to wait for home values to increase; but while you’re waiting, there are steps you can take to start rebuilding your home equity.

1. Make larger principal payments each month

 

Equity is the difference between your home’s value and what you owe the bank. And if you want to build equity faster, increasing your mortgage payments each month is a good start.

Each mortgage payment pays down your principal balance and interest charges. In the early years of a mortgage loan, a larger percentage of monthly payments go toward paying down the interest. However, if you increase monthly payments and make extra principal payments, you can pay down your mortgage sooner. Adding as little as $100-$200 a month to each payment can reduce the principal balance by as much as $2,400 a year.

2. Plan home improvement projects

 

Unless you purchase a new construction home, chances are the house you buy will need some improving. And fortunately, several improvements add value to your property.

Kitchen and bathrooms typically sell homes. For that matter, if these spaces in your home are dated or simply unattractive, a partial or full remodel can modernize the space plus increase your home’s value. Likewise, adding extra square footage to the house raises the property value. You might finish the basement and convert it to a bedroom, an apartment, family room or a game room; or you can add another room on the main level or build a temperature-controlled sunroom for bonus living space. Other updates also increase home values, such as new windows, a new roof and new floors.

3. Curb appeal

 

Many people focus on the interior of their home and completely neglect the outside. But if you’re looking to increase your home’s value, curb appeal shouldn’t be overlooked. The outside of your home is a person’s first impression of the property. And when appraisers assess the value of any property, they also take note of the landscaping and condition of the exterior. New vinyl siding, a new deck and a manicured, de-cluttered lawn adds to the overall condition of your property.

Final Word

 

Home equity increases over time, so you’ll need to be patient. However, if you submit larger monthly payments, complete home improvements and improve the outside of your property, these efforts can give your equity the boost it needs, and when you’re ready to move, you might be able to sell at a price that yields enough profit to put down on your next place.

source: totalmortgage.com