Benefits
of Owning Your Own Home
The
Best Investment
As
a fairly general rule, homes appreciate about five
percent a year. Some years will be more, some less.
The figure will vary from neighborhood to neighborhood,
and region to region.
Five percent
may not seem like that much at first. Stocks (at times)
appreciate much more, and you could earn over six percent
with the safest investment of all, treasury bonds.
But
take a second lookƒ
Presumably,
if you bought a $200,000 house, you did not pay cash
for the home. You got a mortgage, too. Suppose you
put as much as twenty percent down ¿ that would be
an investment of $40,000.
At an appreciation
rate of 5% annually, a $200,000 home would increase
in value $10,000 during the first year. That means
you earned $10,000 with an investment of $40,000. Your
annual "return on investment" would be a
whopping twenty-five percent.
Of course,
you are making mortgage payments and paying property
taxes, along with a couple of other costs. However,
since the interest on your mortgage and your property
taxes are both tax deductible, the government is essentially
subsidizing your home purchase.
Your rate of
return when buying a home is higher than most any other
investment you could make.
If you are
moving to a home for the first time, you are going
to be very pleased with all the new space you have
available. You may have to even buy more "stuff."
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Income
Tax Savings
Because of income
tax deductions, the government is basically subsidizing
your purchase of a home. All of the interest and property
taxes you pay in a given year can be deducted from your
gross income to reduce your taxable income.
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.
Property taxes
are deductible, too. Whatever property taxes you pay
in a given year may also be deducted from your gross
income, lowering your tax obligation.
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Stable
Monthly Housing Costs
When you rent
a place to live, you can certainly expect your rent to
increase each year ¿ or even more often. If you get a
fixed rate mortgage when you buy a home, you have the
same monthly payment amount for thirty years. Even if
you get an adjustable rate mortgage, your payment will
stay within a certain range for the entire life of the
mortgage ¿ and interest rates arenÍt as volatile now
as they were in the late seventies and early eighties.
Imagine how much
rent might be ten, fifteen, or even thirty years from
now? Which makes more sense?
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Forced
Savings
Some people are
just lousy at saving money, and a house is an automatic
savings account. You accumulate savings in two ways.
Every month, a portion of your payment goes toward the
principal. Admittedly, in the early years of the mortgage,
this is not much. Over time, however, it accelerates.
Second, your
home appreciates. Average appreciation on a home is approximately
five percent, though it will vary from year to year,
and in some years may even depreciate.. Over time, history
has shown that owning a home is one of the very best
financial investments.
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Freedom & Individualism
When you rent,
you are normally limited on what you can do to improve
your home. You have to get permission to make certain
types of improvements. Nor does it make sense to spend
thousand of dollars painting, putting in carpet, tile
or window coverings when the main person who benefits
is the landlord and not you.
Since your landlord
wants to keep his expenses to a minimum, he or she will
probably not be spending much to improve the place, either.
When you own
a home, however, you can do pretty much whatever you
want. You get the benefits of any improvements you make,
plus you get to live in an environment you have created,
not some faceless landlord.
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More
Space
Both indoors
and outdoors, you will probably have more space if you
own your own home. Even moving to a condominium from
an apartment, you are likely to find you have much more
room available ¿ your own laundry and storage area, and
bigger rooms. Apartment complexes are more interested
in creating the maximum number of income-producing units
than they are in creating space for each of the tenants.
If you are moving
to a home for the first time, you are going to be very
pleased with all the new space you have available. You
may have to even buy more "stuff."
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