Buying a house is one of the most important, and costly, financial decisions you can make in a lifetime. Even those that scoff at all types of consumer debt are still willing to take out a mortgage to buy a home. There are several benefits of owning versus renting your home, which is why a majority of the world does it. Even after we experienced the housing bubble expand and then burst it is more than apparent that consumers are ready to test the waters again.
With the stock market booming and interest rates at an all-time low it’s become a no-brainer that taking out a loan is beneficial. The interest you will pay on a home loan is much smaller than it has been historically, making more expensive homes more affordable to potential buyers. This helps drive up home values as well. Leave your money invested in high yield stocks and bonds, and take out a loan while rates are still low. Granted, most people can’t buy a house in cash anyways, which means some type of loan is almost always needed. Just make sure you are able to make the monthly payments on however much you finance, find a loan repayment calculator online to figure it out.
I despise paying taxes as I’m sure you do as well. Mortgage loans aren’t just great because of their low interest rates, but also because the interest you pay is tax deductible. Consider that you are in the 25% tax bracket, and you pay $100 a month in mortgage interest, that means $25 of that interest can be deducted off your tax bill. This benefit actually lowers the effective interest rate you are paying on that mortgage because a portion is written off on your taxes. Unlike other deductions there are very few requirements and/or limitations, so pretty much everyone who has a mortgage qualifies.
One of the biggest advantages of owning a home versus renting one is that your house will appreciate in value! You can either pay someone else’s mortgage with your rent money, or you can pay your own. By paying into your own home you build up your equity, and thus increase your net worth. Ideally, at some point down the road you will own the home free and clear with no payments. This is actually something I highly recommend doing prior to retirement. Then there are some people who buy and sell more than one house in their lifetime. For those of you who purchased a house during the financial collapse a few years back, you can now sell your home for a pretty penny. When you rent a house that entire payment is sunk cost. Sure you don’t need down payment money, nor do you pay interest, but you also don’t get any return on the investment.
As you can see owning a home comes with several benefits. Though it’s important that you have enough money saved for a down payment, and that you can comfortable afford the monthly payments.