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Buying a home is perfect for people who want a place to call their own. However, while homeownership comes with a great deal of independence, it also means you’re on the hook financially for any issues. Read on to learn more about the potential risks of owning a home to be aware of.
Real Estate Bubbles
For various reasons, including people’s unwillingness to sell due to pandemic uncertainty and record low mortgage rates, home values have continued to rise by a substantial amount over the last several years. That could mean that if you buy a home today, your home’s value may drop significantly from what you paid for it in a short time. When the housing bubble busts, you may find yourself owing more to your mortgage than the house is worth, making it more difficult to sell, and you may have missed a chance to buy the house at a much lower price.
For new homeowners especially, the hidden costs of owning a home can sneak up on you, particularly if you’re used to renting. Repairing and renovating a house can be extremely costly and time-consuming, and any surprise maintenance needs can put a severe hole in your wallet. Other costs, like property taxes, homeowners insurance, and repairs, can add up on top of a mortgage.
Having a mortgage will typically bind you financially and legally to your home for around 30 years. That makes it much harder to get up and go as life happens. For example, if you get a new job halfway across the country, you must go through the process of selling your home. Conversely, if you lose your job, you’re still obligated to make payments or risk further financial and legal ramifications.
Having To Short Sell
Sometimes, the financial burdens that come with owning a home, along with other personal hardships, can make it too overwhelming to continue making payments on your mortgage. When this happens, you may face the prospect of short selling your home, which means selling it for less than what you owe on the mortgage. Short selling can be an arduous process, from getting permission from your lender to attempting the short sell in the first place to navigating through an endless series of red tape. While it’s rarer in a booming real estate market, this process is something to be aware of when markets take a turn.
While there are quite a few potential risks of owning a home to be aware of, you should weigh the many advantages against them and see if homeownership is right for you. Having a house to call your own can help you create an emotional bond with your living space, and the longer you own the home, the better an investment it becomes.