You may be excited to buy a house whether it’s your first home or you’re selling your current house to move into a new one.
But do you know the truth about owning a home? There may be some surprises lurking in the new home you haven’t considered as you get closer to making an offer on a new place.
So before you start searching for a new home, here are some real estate myths to keep in mind.
Home prices always go up
Home prices have skyrocketed in recent years, but that’s not always the case. There are years when the market could go down and you may find yourself underwater, owing more money on your mortgage than your home is worth.
Real estate can be a good investment over time as well as an important part of your financial portfolio. But the market can change for any number of reasons. You might not want to assume that the value of your home will be higher when you sell it than when you bought it.
The cost of the mortgage is all that matters
You may have used an online calculator to figure out how much money you have to put down and how much your mortgage payments can be each month. But have you thought about the other costs of owning a home?
Some of the big bills to factor in include any utilities you need to pay. Things like electricity, gas, and water are important necessities that need to be added to the cost. You also might want to factor in things like lawn care and snow removal or annual maintenance on the systems that keep your home running.
If you don’t take these extra costs into account, you may be stuck with a house you can’t afford or looking for ways to make extra cash to cover your utilities.
Insurance is just for catastrophes
It’s great to have homeowners insurance. In fact, proof of insurance is required if you have a mortgage.
But insurance doesn’t just cover the complete loss of your home. You could also use your homeowners insurance to make emergency repairs. You may need to check coverage for things like roof damage after a heavy rainstorm or snowfall.
Check with some of the best insurance companies to find out what kind of coverage they can offer you and for how much. Spending a few more dollars each year for additional coverage could help you in the future.
Anyone can be a landlord
Perhaps you’ve decided to expand the real estate portion of your portfolio by buying a property that you might rent or use as an Airbnb. But remember that buying a home as an investment property means you’re responsible for that home.
Landlords have to cover the costs of repairs and property taxes. You also may need to cover utilities such as water, gas, or electricity. And any maintenance, including lawn care or annual systems check-ups, could be your responsibility as a landlord.
Learn how to invest in real estate and understand any additional costs you may incur as a landlord before you decide to make that move.
Renovations will pay off
Renovations may be a good thing to keep your home looking fresh and updated for potential buyers. But your return on investment may not be as much as you put into them
Perhaps you gutted your kitchen and replaced everything with modern appliances, cabinets, and new floors. You may have finished your unfinished basement. Or you added a patio to your backyard for summer barbecues.
Enjoy these renovations while you own your home and know that they may be appealing to potential buyers. But also remember that you may not be able to add $30,000 to the price of your home just because you invested $30,000 in your new kitchen.
Every dollar should go toward your down payment
You may have been saving for years to get a healthy down payment for your first home. Perhaps you’ve been watching the market for the perfect time to come in and buy in the city you want to live in.
However, there are other fees beyond your down payment that you will need to pay when you close on your property. You may have to cover closing costs, including title insurance, underwriting costs, or perhaps even property taxes depending on your local laws.
Those fees could add up quickly and you don’t want to go to your closing and have to cancel because you can’t cover the additional costs.
Renting is throwing away money
It may be tough to hand over a rent check each month knowing you’re paying a landlord with nothing to show for it. After all, it’s not like a mortgage, which is a loan from a bank that you pay until you eventually own your home completely. And you may make a profit when you sell the home.
But there are advantages to paying rent. If you pay on time each month, it could help you boost your credit score. A good credit score may get you a better interest rate on your future mortgage or qualify for a bigger loan.
Renting also frees you from paying property taxes, which in some areas could easily be as high as several thousand dollars per year.
Renting also allows you to get a better idea of what you want and don’t want in your future home without having to make a long-term commitment like you would with a mortgage.
You can cash out anytime
Sure, you can put your home on the market anytime, but that doesn’t mean your asset is liquid. A home is considered an illiquid asset because the cash invested in your property can’t be easily unlocked in case of an emergency or a need to move quickly.
Instead, check your overall financial portfolio and consider balancing an illiquid asset like your home with more liquid assets like a savings account or checking account.
While there may be some myths and misperceptions about buying a home, don’t let that necessarily deter you from getting a new place.
These busted myths are good to keep in mind as you weigh the decision to buy a home. Going in with open eyes could save you a headache later.
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