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Currently, there are two different sides emerging in the debate over the benefits of homeownership to the general public.  The housing crisis of 2008 has challenged conventional wisdom and has changed the way that many view homeownership.  On one side of the debate are the individuals that claim homeownership is the path to the American dream and financial freedom while the other side is dominated by individuals that believe that the claimed benefits of homeownership are overblown and many people would be more secure financially if they chose to rent instead of own their home.

Initial Investment

One of the biggest arguments against homeownership today is the price of the initial investment required to obtain a home.  In the past, when many houses sold for $50,000 or less, the 20% down payment recommended by many lenders was less than $10,000.  Although this is a large sum, it is dwarfed by the amount required as a down payment today as the average housing price has nearly quadrupled over the last two decades.

The initial investment for securing a rental property is the payment of the first month’s rent, the last month’s rent, and a security deposit against damage to the property.  With average rents ranging from $500 per month for an apartment to $1,500 per month for a single family home, the total initial investment will range between $1,200 and $3,500.  This is a much more manageable investment amount for a person to save and allows them to obtain their home much more quickly.

Fees

There are many fees associated with homeownership and every person thinking about owning a home should be prepared to pay some, if not all, of these additional fees.  The costs of the fees, for items such as closing costs, realtor fees, documentation fees, and appraisal charges, can quickly climb into the thousands of dollars.  Some people choose to use their savings to pay these fees at closing while some other choose to add these fees to the balance of their mortgage loan.

On the other hand, there are little to no fees associated with obtaining a rental unit for a residence.  Generally, the only fee that will be charged to the renter is an application fee used to weed out those that are not serious about obtaining a rental unit at the property.  This fee is typically less than $100 and is paid at the time that the rental application is submitted.

Equity

One of the biggest benefits of homeownership is that homeowners build equity in their homes as they continue to pay off their mortgage loans.  Renters do not purchase a stake in the property that they are living in when they make their rental payments and when they leave the premises, the renter has no right to any portion of the property other than their personal belongings.  Although the equity in the home increases slowly for the homeowner, homeowners have the option to extract this equity from the home in the future to pay for expensive obligations, such as a hefty medical bill or college tuition for their children.

Whether homeownership will be an asset or a liability to a person’s financial future depends on the personal circumstances of that particular individual.  The choice to purchase a home should not be made lightly and all of the pros and cons should be weighed before a final decision is made.