Buying a house can be one of the most important decisions in someone’s life. Opinions are mixed on whether it is ultimately a good financial investment or not. However, if you do it the right way, buying a home can be an excellent financial decision. Here are some ways buying a house can be good for your financial portfolio:
Buy When Mortgage Rates Are Low
This year is a great year to become a homeowner, because mortgage rates are incredibly low. It’s important to take into account what the mortgage rates are when you are buying a home, this is a major factor in whether this will be a good financial decision for you. By buying when prices are low, you will save thousands of dollars in interest.
Home Ownership Protects Against Inflation
When you rent, it is a given that your rent is likely to increase once every year or two. Landlords tend to do this to protect against inflation. However, if youd buy a home and are approved for a fixed rate mortgage, your payment will never go up. If you are able to buy your home cash, this will also save you from paying for inflation.
Taxes, Taxes, Taxes
Homeownership and tax savings go hand in hand. There are so many ways homeowners save on taxes, from first time home buyer tax credits, to tax-deductible mortgage interest. You can also deduct real estate taxes; private mortgage insurance, loan points paid on a purchase, seller concessions, and you can even get tax credits for making “green” or energy efficient improvements on your home.
When you rent a home, you are building your landlord’s equity. There is no return on your investment. When you are the homeowner, you are building your own equity. When you pay your mortgage each month, the money is still technically yours, in the form of equity.
Owning a home can either boost or ruin your credit. If you pay your mortgage on time, your credit score will improve and you will show credit companies that you are a good credit risk. Your credit score affects the interest rate you get on other loans (such as car notes and credit cards).
People tend to “overbuy” when it comes to houses. They purchase large, “dream” homes that are too big for them and their families. If you are trust fund baby and buying your home cash, there is nothing wrong with that. But if you are getting a mortgage, you may want to think small. It’s better to have a smaller house that you can comfortably afford, than to have a huge, luxurious home that will end up being very costly and unaffordable.
Buying a home is a very important decision, and there are differing opinions on whether it is a good financial investment. There are actually many different ways in which buying a home can be a good financial decision, if you take the proper steps.