DISADVANTAGES OF OWNING
Maintenance. The renter’s largest advantage might just be the homeowner’s major disadvantage. While insurance might be available to protect against expense from major catastrophe, usual maintenance items are on the homeowners’ dime. Maintenance and repair can be as simple as repainting the baseboards and can also be as extensive and expensive as replacing a HVAC system or sewer pipe. The Balance suggests using the ‘1% Rule’ to calculate maintenance costs. That means budgeting 1% of the purchase price of your home for maintenance each year. So, if you buy a home for $300,000, plan to spend $3,000 per year in maintenance. According to US News and Freddie Mac, homebuyers should actually budget up to 4% of the property’s value in annual maintenance costs. That’s $12,000 for a $300,000 home or $1,000 per month. If you have a home worth $1M, expect maintenance to be up to $3,333 per month. Over the period, and perhaps more if you must replace a costly, long-lived mechanical item, such as a furnace. Keep in mind the usual homeowner’s chores of lawn care, snow removal, gutter cleaning, and other regular home maintenance needs. Upfront and closing costs. Buying a home entails numerous upfront costs. Some are paid out-of-pocket after the seller accepts your purchase offer, while others are paid at closing. These include earnest money, down payment (typically ranging from 3.5% for FHA [Federal Housing Administration] loans to more than 25% of the purchase price), home appraisal, home inspection, property taxes, and first year’s homeowner’s insurance. Loss of relocation flexibility. It’s much easier to break a lease and move out of town than to arrange for the sale of a residence. Selling the home from out of town involves special logistics and financial matters, such dealing with the mortgage while the home is on the market.
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