Having your own home comes with a wide range of benefits. There are tax deductions you can take as a homeowner. The cost of a mortgage is often less expensive than the cost of renting. You can gain an income if you choose to rent out a portion of the home. You’ll be building equity rather than just “paying rent.” These are just a few of the reasons out there that prove that home ownership can be a huge benefit to you as an individual. However, there are also many drawbacks. So, when is the right time to commit to buying your home?
Buying a Home During College
Owning your own home gives you peace of mind. You will always have a place to stay, there will be no moving around from apartment to apartment. You’ll also know that you’re building equity and investing in your choice – another set of benefits that will add value to your life. In recent years, there has been a trend of college students striking out and buying a home during their school years. But is this even a possibility? And if it is – is it wise?
College-age students have many reasons that could spur their desire to buy a home. First, real estate is a fantastic investment. If they choose not to stay in the area after college, they can always turn their home into an investment property. Even when they are staying there, if their home has more than one room, they can rent rooms to friends or other reliable, trustworthy tenants to make an income and pay for their mortgage payments as well as the cost of owning a home (like maintenance, etc.)
Additionally, college students who purchase a home often end up saving money in the long run. Rent in college towns can be very expensive. Rental agencies and leasing companies have the advantage – they know that students need housing, there is usually less housing available than is needed, and so they can increase prices to a very high rate. A mortgage will likely have a less expensive month-to-month payment. This helps college students cut back on costs. Additionally, if they do choose to rent out rooms, they can put the extra rent money back towards their mortgage, effectively paying it off much faster. Renting your rooms (or even the entire house) while taking an overseas job during your gap year, could really mean one year of huge savings.
Of course, there are also drawbacks to buying a home in college. If you are college-aged and can’t afford a down payment for a home, or if you don’t qualify for a good interest rate on your mortgage loan, don’t purchase a property. Of course, it also goes without saying that home ownership comes with challenges. You will have to be willing to put the energy into fixing up the place for renters, making any necessary repairs, etc. This added responsibility may not be what you’re looking for.
When Else Should You Consider Buying a Home?
There are no hard and fast rules as to when you should or shouldn’t buy a home. However, a few good guidelines are:
- Consider buying a home if you’re currently in a “buyer’s market.” If houses are selling for much less than their value and you’re willing to sit on your investment for a while before selling, buying a house or a property may not be a bad idea.
- Build up enough savings for a down payment. Whether you have 10%-20% saved, make sure you have at least a reasonable portion of the overall home’s value saved up for a house down payment. This often helps you to lock in a lower mortgage rate, it helps you to take out a smaller mortgage loan, and it reduces your overall debt. Is never too early to start saving.
- Consider buying a home if you’re in a good area where the rental market is good. This is why college towns are such good candidates for purchasing homes at as a college-aged individual and using them later in life as a rental property for extra income. With rents constantly increasing, you’ll likely be able to make an income on your property or pay it off much faster if you purchase in an area where the rental demand is higher than the house-buying demand.
If you’re a recent graduate, or you’re currently in college, you may be in the prime time of your life to purchase a house. If you’re considering taking this step, ensure that you’re financially capable of doing so. Finally, ensure that you’re purchasing a home that’s worth purchasing. In other words, don’t jump on the first one you find! Take your time and weigh your options – real estate is an excellent investment, but only if you invest in excellent real estate. Look around carefully and find the home that best fits your needs and budget. Only you can make the best decision for your financial future.