7 real reasons why you should buy a home

7 Real Reasons Why You Should Buy a Home

Some people just want a home. No justification needed; you don’t have to convince them they will just buy one. On the other hand, some people need you to provide some logic as to why they need to buy a home before they make a commitment. Fair enough, it is one of the largest purchases you will make in your lifetime. Here are some reasons that might help you decide.

  1. Ownership pride … one of the more popular reasons given by homebuyers is that they want a place they can call their own to decorate and improve it the way they want.  A place for their family where they feel safe and secure.  A place where they can enjoy living and sharing it with family and friends.
  2. A sound investment … people who own homes have an 80 times greater net worth than renters. By investing in an appreciating home over time, it contributes to increasing personal equity.  The high loan to value mortgages that are available combined with the low mortgage rates also contribute to the investment through leverage which has been described as “using other people’s money” to control investment.
  3. Deduction bonus … on their federal income tax return, homeowners can deduct their qualified mortgage interest and up to a maximum of $10,000 of their property taxes as itemized deductions.  Although this deduction is available to a homeowner, there may be an instance where the standard deduction is more beneficial. You can elect to do either method when filing your taxes depending on which one helps you the most.
  4. Capital gain exclusion … a single homeowner can exclude up to $250,000 of capital gain and if married filing jointly, can exclude up to $500,000 of gain on their principal residence.  To qualify, you need to have owned and occupied the home as your primary residence for two of the last five years.
  5. Cash-out refinancing… as a homeowner if you have good credit and enough income you can refinance to borrow the difference between your current unpaid balance and 80% of the fair market value of your home.  This extra money can be used for any purpose and is not a taxable event.
  6. Building equity …this is the difference in the value of your home and the unpaid mortgage balance. Equity will increase as you make each monthly payment. It is like an automatic savings account.
  7. No landlords … why deal with a landlord who will give you restrictions on things like painting, improvements, and pets.  Homeowners don’t concern themselves with rent increases because they have a fixed principal and interest payment for as long as they have a mortgage.

Here is an additional BONUS reason to buy a home now … the mortgage rates are still historically low. The lowest rate that Freddie Mac recorded is 3.35% in December 2012. Today’s rates are at 3.75% for a 30-year fixed-rate mortgage and 3.21% for a 15-year fixed-rate mortgage. Very close to matching all-time lows.

Conversely, the highest recorded rate on a 30-year fixed-rate mortgage was 18.45% in October 1981. Today’s rates are an incredible bargain compared to that. However, many industry experts expect that they will not remain as low as they are now. Buying now and locking in a historically lower rate can save you housing costs and will be reflected in your monthly payment.

A $275,000 mortgage at 3.75% for 30 years has a principal and interest payment of $1,273.57.  If the rate goes up by 1%, the payment will increase to $1,434.53 or $160.96 per month for the 30-year term.

Below is an image captured from Freddie Mac’s website that shows what the averages were as of this writing.

primary mortgage market survey

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