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Jan 27

Home Sweet Home: The Benefits of Homebuying


Momentum at Pace North California Trumark Homes

Although homebuying has always been a cornerstone of the “American Dream,” it is undeniably one of the biggest commitments and investment decisions we make in our lives. Despite the normal jitters (“Can I really afford this?” “What if I lose my job?”), purchasing your own home is still one of the smartest financial moves you can make.
National home prices increased 6.3 percent from November 2014 to November 2015, according to a CoreLogic Home Price Index Report. This index has increased every month since March 2012. Here are five solid reasons why you should consider buying a home in 2016:

  1. Owning is cheaper than renting in the long run – Although it may feel less expensive to just fork over a rent check each month, your landlord receives all of the equity and tax benefits. For you, it’s all out-of-pocket expense with nothing left to show but the month-to-month roof over your head. U.S. rent prices continue to rise as availability plummets. An Oct. 2014 Wall Street Journal story reports that apartment rents have risen by 15.2% since 2009.
    A follow-up story in June 2015 showed that rents are rising faster than inflation, and Americans are increasingly paying more of their income for housing. The interest you pay on your home purchase loan decreases with each passing year. At some point, it’s much lower than the cost of comparable rent. At the same time, you are building equity and accruing value.
  2. Homeowners enjoy tax benefits – Your mortgage interest is deductible, and because it’s highest in the early years of your mortgage, your yearly tax savings can be substantial. Your home loan’s points, or origination fees, are also deductible in the first year of your purchase, and property taxes are fully deductible every year.
  3. Your mortgage payments offer a built-in savings strategy – Every monthly mortgage payment reduces your total amount owed. Equity is the difference between your home’s worth and the amount you owe. As your interest draws down over time, more of your monthly payment goes toward principal, giving you even more equity. If the value of your home rises simultaneously, you build even more equity. Think of this as an enforced savings plan that increases your wealth every month, not the wealth of a landlord.
  4. Home equity lines of credit give you cash when you need it – The equity nest egg you’re building is yours to tap for medical emergencies, credit card debt consolidation, college tuition, home improvements, or luxury purchases. The interest you pay on a home equity line of credit, or second mortgage, is also tax deductible.
  5. You strengthen you credit history and improve your scores – Your consistent, on-time mortgage payments make you very attractive to financial institutions. You become a stable, low-risk borrower who is more likely to receive fast approval when you need to finance a new car.

As The New York Times confirmed in a November 2014 editorial, although renting makes sense for some people, nothing builds wealth like homeownership.