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Thursday, April 19, 2007

Advantages and risks of homeownership



Is homeownership right for you?

Advantages and risks



Buying a home is the largest purchase most people will ever make. Homeownership has great benefits. It also comes with certain responsibilities.

Before purchasing a mortgage, look at your current situation and determine if:
-You have a continuing and reliable source of income prior to applying for the loan.
-You have a credit history that shows you're ready for homeownership.
-Your total debt is manageable and you can afford to take on the costs associated with homeownership.
-You have money saved for a down payment and closing costs.

Advantages of homeownership
-You will have your own place
You will own it, have a place to raise your children and become a part of your community. You can pass your home down to your children, and their children, creating security for generations to come.
-You may pay less to own a home than you would to rent and it is yours at the end! Homeownership can reduce the federal income taxes you pay. You can deduct the interest on your mortgage and property taxes you pay on your home on the tax returns you file each year. These tax savings partially reduce, or offset somewhat, the actual cost of owning your home.
-Your monthly payments will not ever go up if you choose a fixed-rate mortgage!
If you choose a mortgage with a fixed-interest rate -one that stays the same for the life of the loan, say 30 years- you'll pay the same mortgage payment each month for the entire 30 years of the loan.
-Owning a home is the single greatest source of financial security and independence for the majority of people who have taken this step. You can have it, too!

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Risks
-Monthly housing expenses can increase.
-Your monthly mortgage payment may be larger than your rent. These higher monthly payments may be offset by a tax benefit at the end of the year. Talk to a tax professional to understand your particular situation.
-You become your own landlord.
If an appliance breaks, you will have to pay for its repair or replacement. You are also responsible for the maintenance and upkeep of your home and your property.
-You must sell your house to move.
Depending on the local real estate market, you might not be able to sell your home quickly. You should also factor in the likely expense of hiring a real estate professional. Fees can be negotiated and vary across regions. They also vary from professional to professional.
-Property values can depreciate.
You can lose value in your home for a number of reasons, such as a recession, the condition of your home not being kept up, or a drop in a neighborhood's home values. If your home loses value and you have to sell it for less than you owe, you will be required to repay the full mortgage.

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