The American Dream - Homeownership. Owning a home is a big investment, but ask a lot of people the same questions and you'll hear them say it is one of the most rewarding investments you'll ever make. What other financial investment can you use to have backyard BBQ's or paint your daughters' room pink and your sons' room with sports team logos. A lot of first time buyers ask this question, but more and more repeat buyers who have lived through the most recent boom and bust are asking the same questions. There are two sides to every story but at the end of the day, you’ll have to be the one to decide for yourself. That being said, we think buying a house can be a great idea for the long term and here is why.
Real Estate is a finite resource. As available land near places of employment and recreating and shopping has already been developed the options for people to be close to work, shopping and recreation start to get limited. In general, most people prefer to live close to the things they do every day.
Historically prices have risen over the long term, at least since the mid-century. Data before that is not as reliable and arguably the economy was much different. Here is a fairly basic idea, when you get a mortgage and keep it you have locked in your payment for the long term. Interest rates rise - that's good for you remember you are locked in and if interest rates drop - you can possibly refinance!
You get to do pretty much what you want with your house within zoning/building codes. Some communities may have CC&R’s (Covenants, Conditions and Restrictions) that might restrict some ability to do everything you want at least to the exterior. But be forewarned, if you do something very personalized (remember those bedrooms you painted hot pink and deep blue) you might need to get a bucket of paint and a brush when you go to sell!
And don’t forget about the tax benefits. Since a loan is amortized, (payments stay the same but in the early years of your loan more is being paid to interest) your interest will comprise more of your payment until about 2/3 the way through where it will start to flip if you're making regular payments. You should check your own situation with a tax professional, but in most cases this effectively will lower your tax burden, compared to not owning.
Let's look at the most compelling long term advantage, a paid off mortgage. No one likes to think of it, but you will get older and you may not have to worry about income and money, but a lot of people will. Any financial advisor will tell you to at least be thinking of a lifetime financial game plan. Even if you roll your mortgage into a bigger house, or downsize later on, if you make educated decisions, you can end up with no mortgage or a very small one. Other than property taxes each year, regular maintenance to keep the house in working order or perhaps an HOA if you live in a condo, you will live rent free. Now wouldn’t that be nice.
For the highly analytical crowd who wants to calculate this more in depth, check out this buying vs renting link. But remember the data is only is as good as you put in – if you want more help or have questions you can just call us and we can answer your questions or get you in touch with an agent in our network who can give you more detailed market information.