Written By: Dan Brown
If you’re in your 20s or 30s and considering purchasing a home – do not be intimidated! Yes, homeownership can seem daunting, but investing in a home while you are young can be one of the best financial decisions you’ll make in your lifetime. In fact, according to self-made millionaire David Bach, the average homeowner is 38 times wealthier than a renter.
If you are on the fence about buying a home because you think you’re “too young,” think again. Here’s how the purchase can benefit you financially:
Building Wealth
Rather than continuing to invest in your landlord’s mortgage, owning a home allows you to grow your own wealth. Say you spend $1,500 on rent every month for 10 years – that is nearly $200,000 that you could have put towards a down payment on a property of your own.
Investing early will put you ahead of a typical renter when it comes to your lifetime financial achievement. According to the Federal Reserve, a typical homeowner’s net worth is approximately $200,000, while that of a renter’s ranges between $5,000 and $6,000. The reality is that homeowners may have to put more money down upfront, but this decision ultimately builds wealth over time.
And don’t overlook the tax benefits of owning a home – the biggest break tends to come from deducting mortgage interest. You should consult your accountant to discuss deducting interest on the debt you acquired while purchasing or improving your home.
Increasing Value
It’s no secret that the housing market goes through periods of price increases, as well as periods of price declines; however, looking at the bigger picture, the annual return of home prices tends to exceed inflation. This means that although there may be positive and negative changes in the value of your home, prices increase faster than inflation over time. Thus, your home will serve as a valuable asset for years to come.
Second Income Stream
A new home purchase doesn’t always mean that you have to foot the entire bill – consider renting part or all of your home. Remember the $200,000 you would be spending on rent? Well, as a landlord, your tenant’s money can go into your pocket. Use renting as a second income stream until you can comfortably afford to live in your home by yourself – or until you have enough wealth to purchase a second property.
Deciding to become a homeowner is a big step – and one that you should not take lightly. Evaluate the numbers and consider your goals, keeping in mind that your first home may not necessarily be your dream home. As long as you’ve done your due diligence, and you know you can afford your home – and all of the associated costs (utilities, appliances, furniture, unexpected emergencies) – you shouldn’t be afraid to take the step and purchase a home.
Once you’re in the market, it’ll be easier for you to grow your wealth and explore all that the housing world has to offer. Let our loan officers at the Kelly Team at Envoy Mortgage walk you through the different financing options that exist so that you too can be a homeowner! Contact us for a free consultation.