Why Homeownership Can Be a Smart Decision
It all comes back to the phrase “home is where the heart is.”
Owning a home is ingrained in the American spirit. It provides a sense of stability in that there is a place to call home that will always serve as a spot to unwind and to be with the ones you love.There is another aspect in play when it comes to why being a homeowner is a smart decision. Owning a home is a good financial decision that very often pays off over the long run.
Here are just a few reasons why homeownership can be a smart decision.
Buying Can Be Cheaper Than Renting
The basic principle is that you are paying down a loan for an asset you own rather than regularly making payments toward an asset that someone else owns. The rate of return there speaks for itself. When you look at what you would be spending for both options over the life of a loan, owning can be up to 35 percent cheaper than renting in some areas, according to a Trulia study.
An extra 35 percent savings of the cash spent on the place you call home sounds like a good deal to us!
Homes Can Build Equity and Become an Asset
Home equity is defined as what the value of a home is minus what the homeowner's balance is on the loan. If your home's market value is sitting at $325,000 and you owe $225,000 on that home, you may have thousands of dollars in equity. Banks will lend money from that equity to a homeowner, which is called a home equity loan. You can use this money to do upgrades on the home, pay off debt, college tuition, or make other large purchases.
Home Prices are Continuing to Appreciate
According to the latest quarterly report by the National Association of Realtors, metro home prices accelerated in the fourth quarter of 2015. Specifically, the median existing single-family home price increased in 81 percent of the markets that were measured and 145 out of 179 metropolitan statistical areas “showed gains based on closings in the fourth quarter compared with the fourth quarter of 2014.” For all of 2015, 89 percent of measured metro areas had an increase in home prices, which is an increase from the averages in 2014 (83 percent) and 2013 (88 percent), according to the report.
In addition, the National Association of Housing Builders expects the average national price of housing to increase 4.6 percent in 2016. Now is a great time to buy!
Interest Rates are Still Considered Low
In March 2016, it was reported by ABC News that the average rate for a 30-year mortgage was 3.68, which is around the same rate as in January 2015. By comparison, the average rate 10 years ago was 6.32 and 20 years ago it was 7.62, according to Freddie Mac.
Rates can fluctuate like anything else, but right now they are low. Typically, homebuyers have a 30-60 day window to lock in an interest rate. Locking it in earlier allows them to avoid it going up during their lock period.
The interest on a mortgage can be tax deductible if you itemize your taxes and it may be surprising how much can sometimes be saved. Homeowners can deduct their mortgage interest, pieces of their initial closing costs and property taxes.
The benefits of homeownership are twofold – you can provide yourself and family with a consistent source of stability from a mental standpoint as well we from a financial standpoint. In the end, deciding to be a homeowner is a smart decision.
For further assurance on your home buying decision, try American Pacific Mortgage’s calculators to compare mortgage rates, loan programs, terms, or to see how much home you can afford. These tools are easy to use and will give you answers to many commonly asked loan questions.