Managing Director for the Joint Center for Housing Studies at Harvard, Eric S. Belsky, released a paper titled The Dream Lives On: The Future of Homeownership in America, detailing five financial reasons people should consider buying a home.
- Housing is typically the one leveraged investment available. With real estate, down payments and loans help finance a house together. As home values appreciate, so does the return on your equity.“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, home ownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”
- You’re paying for housing whether you own or rent. Don’t pay your landlord’s mortgage — pay your own! “Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”
- Owning is usually a form of “forced savings.” A home is an investment, and you can use the equity found in your home to pay for renovations later. This forced savings plan helps ensure that you have an investment to use in the future.“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”
- There are substantial tax benefits to owning. Homeowners have tax benefits that renters don’t have. Being able to deduct mortgage interest and property taxes from your income helps minimize your taxes.“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”
- Owning is a hedge against inflation. Over time, homes generally appreciate faster than the rate of inflation. Owning helps keep your investment more valuable than other options.“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”
No matter the reason, home ownership is a smart financial investment. Talk to our real estate agents or Wisconsin Mortgage loan officers today to work toward owning real estate as an investment in your future. Shorewest and its agents are not financial advisors. Please consult with your personal financial or tax advisor for complete details.
Categories: Home Buying