Buying is preferable to renting, even though both options have points that make them a viable option. Over time homeowners build equity in their home they can use in multiple ways to their benefit. Homeowners tend to pay less over time than most renters with the added benefit that the homeowner will eventually profit from owning their home. The homeowner is free to modify the interior or exterior of their home as they desire. These are some of the reasons owning is better than renting.
A homeowner’s monthly payment goes toward interest and paying off the principal of their loan. Interest is defined as a charge made for a loan or credit facility, or a payment made by a bank or other financial institution for the use of money deposited in an account. The amount paid against the principal becomes value that the homeowner has in the home. Principal is defined as the initial amount of money that was invested or borrowed. The value of a piece of property over and above any mortgage or other liabilities relating to it is called equity, and it is a resource that a renter will not have Ginniemae.gov (n.d). There are two ways that the equity can be used: the first is if a homeowner is going to move and decides to sell his or her home the more equity they have built up, the higher their potential profits will be. The benefit to this is that the homeowners will have the profits from their sales to use for starting over with another house. The second is that it provides a source of funds that can be borrowed against, in the form of a home equity loan line of credit, or by refinancing the mortgage, a loan agreement that is secured by property, and receiving the extra money that the home is worth in cash. Home equity loan is defined as, a loan by which the borrower’s home is used as collateral, usually secondary to a first mortgage. The homeequity.net(n.d) website lists some of the things a homeowner can use this line... [continues]
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