The American dream for many years has been to own a home. After the last few years, there are some that may think home ownership is not a good idea – for others, they are very excited to own a home. People want to buy a home for many reasons, here are some financial reasons to buy a home.
1- Housing is typically the one leveraged investment available. Not many people want to borrow money to buy stocks and bonds, but they will borrow money to buy a home. Housing is one area where you can borrow against an asset to try and make money in the long term.
2- You are paying for housing whether you own or rent. Homeowners are paying a mortgage, while those that are renting are paying their landlord. Renters don't gain the equity in the home, their landlord does. For some, they can buy a home for less than they can rent.
3- Owning is a forced form of savings. Some people have trouble saving money and will figure out a way to make their house payment, but can't save any extra money. Since most homes will typically appreciate in value, it's a way to save for the long term.
4- There can be substantial tax benefits to owning a home. Many homeowners are able to write off their mortgage interest and property taxes. This can help lower your tax bill. If you aren't sure about what you are able to do, talk to your accountant and see if you can save yourself some money.
5- Owning is a hedge against inflation. Housing costs and rents have tended to go up over most time periods at a rate higher than the rate of inflation. This helps make home ownership a good proposition.
As we have seen over the last few years, there is not a guarantee that your home value will increase, but for many of us, it has. Values may have dropped for a couple years but for many, home values have been increasing again. Interest rates are great, so it's a great time to buy a home!