Owning a home is the classic American dream, and the economic benefits of homeownership are great. Instead of paying rent to the man, you are buying something of your own that, like fine wine, should appreciate in value over the years.
Here are 5 reasons why owning a home is a good thing:
1. You can get a good deal. We’re four to five years into the biggest housing bust in modern history, and prices have come down a long way – about 25% in Marin from their peak in 2007. Will prices fall further? They could, but it’s unlikely we’ll see a further decline in Marin homes. It’s a buyer’s market, the likes of which we’ve never seen!
2. Mortgages are cheap. Today you can get a 30-year loan for around 4.3 percent. These are the lowest rates on record. As recently as two years ago they were about 6.3 percent. That drop slashes your monthly repayment by a fifth, and it’s a pretty good bet you won’t see these mortgage rates again in your lifetime.
3. You’ll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you’ll get a tax break on capital gains when you sell. Many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.
4. It offers some inflation protection. Studies by Professor Karl “Chip” Case (of Case-Shiller), and others, suggest that over the long-term housing beats inflation by a couple of percentage points a year. That’s valuable inflation insurance, especially if you’re young & raising a family and thinking about the next 30-years.
5. It’s forced savings. If you can rent an apartment for $2,500 month instead of buying one for $3,000 a month, renting may make sense. But will you save that $500 for your future? Most won’t. You have to do your math, but the part of your mortgage payment that goes to principal isn’t a cost. You’re just paying yourself by building equity. As a forced monthly saving, it’s a good discipline.