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Top 5 Financial Reasons to Buy a Home

Posted by Mary O'Neil on April 21, 2016
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buy a homeDid you know that Harvard researchers released a paper on all the reasons you should buy a home? We’ve even got a link to the whole bit of research – The Future of Homeownership in America. And after going through the paper pretty thoroughly, we thought we’d list some of the best reasons to buy a home!

Here are the top five, with the appropriate except from the study linked above.

The Top 5 Reasons to Buy!

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 type of “forced savings”. Forced savings are savings that you make without regard to your paycheck or actual savings deposits– basically, savings you make without thinking about it. “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.” Can’t beat that, can you?

4.) There are substantial tax benefits to owning. Guess what? You can deduct parts of your mortgage from your taxes! “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. According to the study, “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.”

At the End of the Day

Home ownership is a big financial responsibility! But the best decisions aren’t made with just finances in mind; they should be made holistically, looking at every element of your life. Are you ready for the responsibility? Are you likely to move? Money isn’t the only thing which matters!

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