The Best Investment
Depending on the time and location, you can expect homes to appreciate approximately one to five percent a year.
A five percent increase may not seem that attractive at first, especially when stocks and bonds have the ability to appreciate at a higher rate.
But What if...?
You purchased a home for $200,000 with a twenty percent down of $40,000; Although, you took out a mortgage for the balance, your $40,000 would be an investment.
With an annual 5% appreciation rate, your $200,000 home would have increased in value an additional $10,000 in the first year. Your $40,000 has now earned you $10,000 or 25%.
Even though your paying for mortgage and property taxes, they are tax deductible, allowing the government to subsidize the purchase of your home.
This explains why the purchase of your home may very well provide you with a much higher return, than any other investment you may venture into.
Income Tax Savings
Your taxable income is reduced when the annual sum of interest and property taxes you paid throughout the year is completely deducted. Because of these deductions, your home is essentially being subsidized by the government.
For example, assume your initial loan balance is $150,000 with an interest rate of eight percent. During the first year you would pay $9969.27 in interest. If your first payment is January 1st, your taxable income would be almost $10,000 less - due to the IRS interest rate deduction.
Remember, property taxes are deductible. The amount of property taxes that you paid may be deducted, lowering your gross income.
Stability of a Mortgage
If you pay rent, you are probably familiar with periodic rent increases. However, when you buy a home with a fixed rate mortgage, you can expect to be paying the same amount for the life of the loan. If you obtained an adjustable rate loan, you can be sure your loan will stay within a certain bearable range.
With this in mind, think of how much your rent could be in the future. Which would you rather have?
Effortless Savings
For some, putting money away in a savings account can be next to impossible. But owning a home makes saving money almost effortless.
First, each month you pay your mortgage, part of your payment will go to the principle (even in the early years, although it may be at a much smaller amount).
Then, there is the appreciating factor. On average, a home will appreciate around five percent a year. Of course, it can depreciate in some years; yet historically, owning a home has shown to be a sound investment.
Your Home is Your Castle
Renting limits you on home improvements. Not only do you need permission to make changes, but does it really make sense to spend a countless amount of money to benefit your landlord?
Since generating money from the property is the reason your landlord rents to you in the first place, you can count on a lack of enthusiasm from your landlord toward improvements of your rental.
Owning a home gives you freedom. You can create your ideal living space, and benefit from improvements you have made.
A Space of Your Own
More than likely your own home will provide you with more space both inside and out. If you are moving from an apartment, where the main concern is maximum rental income, your new home; condominium, townhouse, or house should prove to be a roomy place all around.