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 Why buy a home?
Buying a home is likely to be one of the wisest, and most important, decisions of your life. Knowledge is power, so you are smart to educate yourself about what is likely to be expected of you in this area.
Here are some of the reasons why home ownership makes sense.
Investment Appreciation
Homes appreciate in value over time. Even if you do make any improvements, the rise in inflation each year will be savings for you. The investment pays off when you move. If you can command even a little more money from the property you are selling than the amount you paid for it, you can use your equity in that home to buy a nicer, perhaps larger one.
Leverage
One of the greatest benefits of housing as an investment is leverage. Leverage means investing as little as possible of your own money to make as large a purchase as possible; you use borrowed money (the mortgage loan) as a means to purchase your home investment. As a result, a small percentage of appreciation in home value can mean a terrific return on the cash you actually put into the purchase.
For example, let's say you are allowed by a mortgage lender to make a $10,000 down payment on a $100,000 home. Your home appreciates at a rate of 5 percent in the first year. At the end of that year, therefore, the house is worth $105,000. At the end of the second year, $110,250 and so on. After three years you are ready to move up to a larger home. Because your home is in good condition and well-taken care of and nicely decorated, it sells for $119,000. When you covered expenses, you net $110,000. After paying off the mortgage balance of $89,000 you have slightly more than $21,000 cash in hand. Your $10,000 investment has more than doubled in three years, all thanks to leverage. And those numbers are conservative in some areas of the country.
Tax Benefits
Interest paid on a mortgage loan is deductible from your gross income on federal tax returns. So are real-estate taxes. The two together usually comprise all but a few dollars of the monthly payment made to the mortgage holder in the early years of home ownership. Thus, for the homeowner, housing becomes, in effect, a deductible expense. Tenants have no such benefits.
Equity Growth
For many people, owning a home is the best way to save some cash. Although the payments on the mortgage in the first year's are almost all interest, as time goes by you do begin to pay off the loan. If you combine the gradual reduction of principal with appreciation and protection against inflation, you have a growing equity. This is another way looking at the investment appreciation mentioned earlier -- and it's a great savings plan!
Payment Stability
The fixed-rate, long-term mortgage is the most popular form of home financing. The mortgage agreement assures the home owner of a constant base payment for housing for 20 to 30 years. Inflation or an increase in housing demand may raise rates as the years go by, but your mortgage payment will remain the same for the length of your loan. Can you say that about rent?
Economy
Owning a home can be economical in the long run. After you own your home you are more likely to be energy conscious with both your fuel and electric utilities. And many home owners grown their own vegetables, thus saving a bit on winter grocery bills. You may decide to use your creativity and extra basement or garage space to produce a marketable item. Or you may use a room as an office and work from your home, thus saving on gas, wardrobe and lunch expenses. You may be a bit limited with zoning restrictions, but there is always room for new creative ideas.
Space
Besides the financial advantages to owning a home, you may be considering the more practical reasons, one of them being additional space. You are much more likely to have more space for your money in your own place rather than in an apartment. Not only are you likely to gain rooms, but also larger room size and storage areas such as an attic, basement or garage space.
And as for outdoor space, when you own your home you also own the piece of land it resides on. This can be a very important feature. Whether you use your property for gardening, work, play or relaxation, it is an extra space cushion between you and your neighbors. It can provide the privacy that you are lacking with a rental situation.
Pride
Owning a home brings a sense of pride. Our society as a whole regards owning property as a positive status symbol. As a home owner, for example, you will probably find that it is easier to get credit or a loan.
Do you recognize yourself in some of these reasons for home buying? Probably in several, right? In general, home ownership is a solid, positive move.
Call us today to set up an appointment and we'll help you find a home for you and your family.
If this article did not answer all of your questions about this topic, please call us and a Knecht representative will be happy to explain all the details and legalities that are involved with selling or buying real estate property.
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