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WHY OWN YOUR OWN HOME?

Clearly not everyone should own their own home. The old cliche about all money paid in rent is money thrown away, is misleading. Most money paid on a mortgage or house payment goes to interest and builds up little more equity than rent. Home ownership is only for those who have some reason they are going to stay put long enough to have some build up in equity. Having to sell a home before the home substantially increases in value, is much worse than renting.

So what are the benefits?

Equity buildup. Unless you pay cash for a home, something almost unheard in today's world for first time buyers, the equity buildup in a home is almost entirely from an increase in value of the real estate, called appreciation. As real estate has continued to go up in value, at rates which often exceed the general inflation rate, home ownership (for the long term) continues to be one of the best investments you can make. What can make it dramatic, is the ability to borrow most of the money to buy a home, called leveraging your initial investment, which can multiply the return on investment. The term leverage is used because it is similar to the use of a lever, where a small movement on the short end of the lever, results in a large movement on the long end of the lever. A simplified example: if your investment moves 10% and you only invested 1/4 of the money for the home in cash, then such increase is a 40% increase in your investment. Assume a $100,000 home, a 10% increase in value, to $110,000. But the return on investment is measured not in terms of the initial purchase price, but the $25,000 down payment. Thus, $10,000 divided by $25,000 is 40%. Almost no other investment vehicle offers this kind of return.

Tax Advantages. Making the investment even more attractive, is the fact that interest and tax payments on your home are generally deductible from your taxable income, meaning the net after tax cost of owning a home, may be little more than the cost of renting a comparable dwelling. Even better, in most cases capital gains taxes on the sale of a home are deferred or eliminated entirely. This means that your net worth can continue to grow, at leveraged rates, without ever paying the taxman his due.

Housing Needs and Wants. Most people desire to own and ultimately buy a home, because homes which they own, do a much better job of fulfilling their long term needs for housing.

How much house can I afford?

Why use a Realtor?

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