Why Home Buying is a Smart Thing to Do
Perhaps you have been renting the same place for a long time. The rent is cheap; the landlord or lady is nice. You've been able to paint it the color that you like. It feels like home. So why would you actually buy a place to live?
Well, it can be one of the smartest things you do.
Many financial experts have shown that homeowners come out ahead when it comes to funds for retirement. While this may not be a big incentive now, in most cases those who own homes are also doing better financially overall. For instance, if you buy your first home at 30 and upgrade once at 35, you could have your total mortgage debt paid off by age 60. That allows for a full 25 years to pay off your mortgage debt. Once that debt is paid off, you suddenly have the equivalent of your mortgage payment available for other things! Imagine how much easier life would be if at some point you had paid enough rent and didn't have to pay it anymore. That's the kind of deal you get with homeownership.
But there's even more in it for you. Consider:
Let's face it; we'd all like to save more on our taxes. While you pay rent, you get no tax breaks. However, if you buy a place to live, you can deduct the interest on your mortgage (and in the early years, most of what you pay is interest) and you can even deduct property taxes come April 15th! That could save you some money right off the bat.
An asset that appreciates in value.
If you stay in your home for 25 years, you have a very good chance of making money on it compared to what you paid for it. For that matter, statistics show that the US national median home price has risen every year since 1968! Not too many investments can boast that kind of return. Typically, the value of your home keeps up with inflation, plus 1 or 2 percent.
An asset in which you build equity.
You are working to pay off your home, right? As you do that, you build "equity" in your home. This means that you own more and more of it as you pay down your mortgage. Again, rent can't compete. Think of your mortgage as a "forced savings plans" that will pay you back down the road.
Additional borrowing power.
If you've ever needed to borrow money while renting, you know that it can be tough to do. If you do get approved for a loan, it's likely to be at a punishing rate of interest. However, if you own your home, you have something "to borrow against". Lenders consider you more secure. This is another side benefit of equity in your home. You are able to "secure" loans through that equity.
When you own you gain stability.
When you rent, the amount you pay is in the hands of the owner of your unit. You can't negotiate that you'll have no increase in rent for 5 years for instance. If you own, you can get a locked-in interest rate for up to 10 years. You'll know exactly what you'll be paying in each mortgage payment for that full period. Again, rent can't compete.
You have the freedom to have the home you want.
Do you like pink walls? Done. Are you a big fan of wallpaper? Go ahead. Perhaps you've always wanted to have wall-to-wall broadloom. You put together the money; you make the changes. When you own the place, you decide how it's furnished, how it's decorated and how much you spend on doing all that. There will be no fines for leaving scratches in the walls; it's simply up to you whether to fix them or not. If you plant your mother's perennials in the backyard, they'll be staying with you, rather than being lost to the next tenant.
If you are still thinking about buying, keep these things in mind!