Good "Cents" - Top 5 Financial Reasons to Buy

Good "Cents" - Top 5 Financial Reasons to Buy (Image Source: Wikimedia Commons)

We are in a market saturated with buyers. Interest is high, despite low (but growing) inventory, as many are able to realize the dream of becoming a homeowner.

Why own a home? Of course, these answers vary from person to person, but there is an underlying understanding of the financial benefits of becoming a homeowner. Eric Belsky, Managing Director of the Join Center of Housing Studies at Harvard, recently outlined 5 top financial benefits of homeownership. If you're thinking of buying, here are some important financial benefits which may help your decision making process.

1. A Leveraged Investment

Housing investments are a well-leveraged investment that lenders are far more willing to entertain than for stocks and bonds. Homeownership, as Belsky states, allows households to heighten appreciation on home value 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. Owning or Renting - You Still Have to Pay

Whether you're sending off a monthly rent check to your landlord or making a monthly payment on your housing mortgage, you will have to make payments on your living situation one way or another. Why not put the money you earn right into your own, secured investment (to be redeemed at a later date when you resell your property) rather than into someone else's pockets?

3. Forced Savings

Accumulating income is one thing - retaining income in the form of savings is another. Saving money can be a challenge for many Americans. Luckily, home ownership typically becomes a form of "forced savings." Since housing payments must be made one way or another, owning a home can be a great way to reduce the tendency to defer savings.

4. Tax Benefits

We've recently written on the tax benefits that owning a home espouses, which definitely provide strong incentive in of themselves. Homeowners are able to deduct mortgage interest and property taxes from income. In addition, moving and capital gains can often grant a tax break. Belsky elaborates:

 "[C]apital 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. Hedging Against Inflation

It's no big surprise that housing costs and rents rise alongside rate of inflation, often at the same pace or even higher. Owning a home is a resourceful way to surmount this problem (and perhaps benefit from it when it comes time to sell.)

Questions? We'd love to hear from you! Don't hesitate to send us an email or give us a call.

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