Why You Should Own Your Own Home

1. It’s a Great Way to Invest Your Money

Are you always being encouraged to invest in the Stock Market? It’s true that you could potentially earn over 6% when buying treasury bonds, the safest investment around, but have you considered what you might earn by investing in a home? In general, a home will appreciate about 5% each year. This figure will vary more or less depending on the neighborhood and region of the country in which you live. However, a 5% return looks pretty good when compared to a low-risk investment the Stock Market!

Let’s look at it another way…

We will presume that you bought a home worth $200,000. More than likely you put a 20% down payment on the purchase of the home and financed the remaining balance with a mortgage. That means that you have made an investment of $40,000 in your home.

Assuming an annual appreciation rate of 5%, your $200,000 home would show a $10,000 increase in value after the first year. This translates to a $10,000 earning with a $40,000 investment, or a staggering return of 25%!

But, I can hear you say, I’m making mortgage payments and paying property taxes! You should remember, though, that both the interest on your mortgage and your property taxes are tax deductible. It’s almost like the government is subsidizing the purchase of your new home.

I hope this has proven to you that the rate of return you will experience when buying a home is greater than almost any other you could achieve with another type of investment.

2. You Can Save on Your Income Taxes

As was previously mentioned, the government is basically financing the purchase of your new home. Your gross income can be reduced by deducting all of the interest paid on your mortgage loan and your annual property taxes. This reduction in gross income leads to a reduced taxable income, and therefore a tax savings for you!

Let’s use another example to explore this benefit. Staying with that $200,000 house you bought earlier, let’s say you initially had to finance a total of $160,000 with an interest rate of 8%. Assuming the first payment is January 1, after that first year of mortgage payments you would have paid nearly $12,800 in interest. Because of the IRS interest rate deduction, your taxable income would be almost $12,800 less!

And that’s not all…remember that your property taxes are deductible, too. That means that you can further reduce your gross income by deducting property taxes paid for a given year, thereby lowering your tax obligation.

3. You Can Have Predictable Monthly Housing Costs

Renters always live with the uncertainty of if or when the next rental increase will occur. If you decide to finance your home using a fixed rate mortgage, you will have nearly the same monthly payment amount for the entire life of the loan. Even with an adjustable rate mortgage, you are given a certain range over which your payments may vary over the life of the loan. Either way, you can reliably predict your monthly housing cost.

Given the choice between renting and owning, which makes more sense?

4. It’s a Great Way to Save Money

Believe it or not, a house is like having an automatic savings account. The first way to accumulate savings is by paying off your mortgage. Each month a portion of your payment goes toward the principal, thereby increasing the equity you have in your home. Initially this increases at a slow rate, but it accelerates over time.

The second way your home can make money for you is in its natural appreciation. As discussed previously, the average appreciation rate for a home is about 5%. Over time, the rate of return you will experience after purchasing a home is greater than almost any other you could achieve with another type of investment.

5. Personal Independence

Have you ever been a renter? You must get the landlord’s permission to make improvements to the rented environment to make it more livable. But who benefits from these improvements? Certainly you do as long as you live there, but ultimately it is the landlord that benefits.

Now think about being a home owner. You can do pretty much whatever you want. Go ahead and paint each room a different color, replace the carpeting, put in tile or hardwood floors, cover all the windows with your favorite shades. You will create an environment in which you want to live. You are the one who benefits.

6. Room to Grow

It all comes down to space. Indoor space and outdoor space will probably be more plentiful if you own your own home. Then it will be up to you on how to use that space. Have fun!

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