There are seven main reasons why home ownership is a good investment:
- Creates Wealth: Buying a home is the largest investment most families will ever make and homeownership is the single largest creator of wealth for Americans. More than 4 out of 5 Americans think the main reason to own a home is that it is a good long-term investment, according to the annual National Housing Survey conducted by Fannie Mae.
- Builds Equity: Families can build financial security as the equity in their home increases. Home appreciation has historically risen 5-6 percent annually on a national level. Homes have never lost value and have consistently beaten inflation since 1968, according to the National Association of Realtors. This is why real estate has always been a more secure investment than stocks.
- Lowers Debt: As homeowners repay mortgages, their debt declines, while overall wealth and equity in their homes grow.
- Provides a Great Return on Investment: If you bought a $200,000 house with 10% down, that would be an investment of $20,000. At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. This means you’ve earned $10,000 with an investment of $20,000. Your annual return on investment is a whopping 50% percent!
- Lowers Taxes: You are allowed to deduct the interest on your mortgage payments, as well as your property taxes, from your taxable income, as long as your mortgage doesn’t exceed the value of your home.
- Earns Profits, Tax-Free: A couple who owns and lives in their home for two years and then decides to sell can keep up to $500,000 of the profit tax-free. (A single owner can keep $250,000.)
- Provides Additional Lines of Credit: Many families elect to take out home equity loans to help put children through college, purchase a second home, make home improvements, start a new business, pay for medical costs or take vacations. Interest payments on home equity loans are also fully tax-deductible up to $100,000.