Common knowledge suggests that the goal of every person should be eventual home ownership, allowing you to have a place of your own that you can decorate to your tastes and stay in forever while the equity in the home builds year after year. Unfortunately, this belief that a home is always an asset has been shaken by the current economy and housing situation in America. Many homeowners are now seeing their homes as more of a liability than an asset.
If your home is taking up most of your income in housing costs, maintenance, and repairs, it may be more of a liability than a asset for you and you may have some hard decisions to make about whether the home is worth keeping. By looking at a few features of home ownership and how they are currently affecting your finances, you should have the information that you need to make a determination on whether you should keep your home or try to sell it and return to renting. Here are some factors that will tell you if your home is an asset or a liability.
Amount Of Mortgage Payment
The amount that you are paying for your mortgage should not exceed 30% of your total take-home income. Many people that purchased their homes during the housing boom took out exotic mortgages with payments that ballooned at a later date so that they could afford a bigger home and now those payments have reset to a higher rate that may be more than 50% of their monthly income. If your mortgage payment is more than 30%, you are paying too much and may not have enough money left over for other expenses needed to keep the home in good condition and provide for your daily needs.
Maintenance Costs
The additional cost of maintenance and repairs for the home is one thing that many people do not take into consideration before buying a home. This cost can range anywhere from a few hundred to several thousand dollars each year, depending on the materials used in the home and the size of the lawn around it. These additional costs can be too much to bear for home owners that are strapped for cash and barely making ends meet, causing the home to fall into disrepair and decrease in value. If you cannot afford the costs to maintain your home, you may want to consider returning to renting.