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Here are the five reasons, each followed by an excerpt from the study:
1.) Housing is typically the one leveraged investment available.
“Few households are interested in borrowing money to buy
stocks and bonds and few lenders are willing to lend them the money. As
a result, homeownership allows households to amplify any appreciation
on the value of their homes by a leverage factor. Even a hefty 20
percent down payment results in a leverage factor of five so that every
percentage point rise in the value of the home is a 5 percent return on
their equity. With many buyers putting 10 percent or less down, their
leverage factor is 10 or more.”
2.) You're paying for housing whether you own or rent.
“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”
3.) Owning is usually a form of “forced savings”.
“Since many people have trouble saving and have to make a
housing payment one way or the other, owning a home can overcome
people’s tendency to defer savings to another day.”
4.) There are substantial tax benefits to owning.
“Homeowners are able to deduct mortgage interest and
property taxes from income...On top of all this, capital gains up to
$250,000 are excluded from income for single filers and up to $500,000
for married couples if they sell their homes for a gain.”
5.) Owning is a hedge against inflation.
“Housing costs and rents have tended over most time
periods to go up at or higher than the rate of inflation, making owning
an attractive proposition.”
Bottom Line
We realize that homeownership makes sense for many Americans for an
assortment of social and family reasons. It also makes sense
financially. If you are considering a purchase this year, contact a
local professional who can help evaluate your ability to do so.
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