Benefits of home ownership. Given all of these issues, you might wonder why you should seriously consider owning a home. Here are some issues to consider:
- You can live in your home. You can’t live in an S&P 500 index. Assuming you can afford your home, purchase it with a significant down payment, obtain a fixed mortgage, and consider paying off your mortgage as quickly as possible. Owning a home will give you a sense of security that you cannot find in a rental unit.
- You can customize your home to your individual needs, as opposed to rental units, where your options are more limited.
- You will have a sense of permanence and a feeling of being part of a community when you own your home.
Although a home has historically underperformed investments in stocks, most homes do appreciate over time. In addition, owning a home will reduce your federal and state tax obligations because of the deductibility of interest payments on your mortgage. Remember, though, that there isn’t any assurance tax laws will stay the same. If they change, this benefit could be reduced or eliminated.
A home is a vehicle for forced savings. You have probably heard the argument for term life insurance over your whole life: Buy term and invest the difference. The reality is that most people who buy term life insurance spend the difference. Having a mortgage payment due forces you to make payments. Over time, you will find that you have accumulated significant equity in your home.
If you have a fixed-rate mortgage, your mortgage costs will be stable for the entire period of your mortgage, which is commonly 30 years. Rent typically increases yearly. The “real” cost of your mortgage will actually decrease because of the effects of inflation, assuming you have a fixed-rate mortgage.
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