Homeownership is a long-term financial commitment. It requires a down payment and transaction costs. Plus, the value of your house may not increase right away.
Despite these drawbacks, here’s why buying a home can be a smart money move.
1. You build wealth over time:
Pick the right mortgage and buy a home you can afford and home ownership can be a very savvy financial move.
2. You get to buy at prices you may never see again:
As home prices eventually go back up, the appreciation will allow you to build wealth.
3. You’re forced to save:
Paying your mortgage every month and reducing the amount of your a principal is like a forced savings plan that helps you build equity (home value minus mortgage) over time.
4. You get to build a second income stream:
By taking a renter in, you’ll be able to increase your income by raising rent based on prevailing market conditions.
5. You don’t have to speak to a landlord ever again:
Nor do you have to wait anymore to get the dishwasher fixed, the air vents cleaned or leave messages about repairs. As the homeowner, you’ll be in charge. And you’ll have to pay the plumber.
6. Stay for as long as you want:
No one can kick you out. You also won’t have to worry anymore about rent hikes or moving house, should your landlord decide to end the lease.
7. Rents go up, a fixed mortgage rate doesn’t:
Lock in a low monthly payment and you’ve just protected yourself against inflation. This way, your costs are predictable and more stable than renting.
8. Customise your space:
Get a pet, knock down walls, paint them pink or do anything you like with your home without worrying about losing your security deposit.
9. In the long term, buying is cheaper than renting:
While it may be cheaper to rent in the first few years, as the interesting bit of your mortgage payment decreases, it will eventually be lower than the rent you’d be paying your landlord.
Of course, buying isn't for everyone. If you might move soon, want the flexibility to upgrade your home or your job situation is uncertain, then renting can be ideal. Use our Price Index to know the cost of properties in your area. And consider the transaction costs of homeownership before taking the plunge.
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