Interest Rates Are Still Relatively Low
It’s true that interest rates have fluctuated in the last 12 months, mostly in an upward movement. But historically, rates are still low and homeownership remains a solid financial investment. Remember, the annual average for a 30-year fixed-rate mortgage in 1981 was 16.63% and in 1991 was still 9.25%. Our rates today make buying much more attractive and feasible for all!

Wealth Building
The Federal Reserve Board estimates that homeowners have a net worth nearly 36 times more than that of renters. As a general rule, homes in our area appreciate 4-8% per year though that figure varies from year to year and neighborhood to neighborhood. Four percent does not sound like a particularly high rate of return, but let’s look at the actual math. Let’s consider the situation if you buy a $200,000 home and put as much as 20% (or $40,000) down. At an appreciation rate of 5% annually, your $200,000 home would increase in value $10,000 during that first year. That means you just earned $10,000 on your $40,000 investment - or a 25% return! Sounds better doesn’t it! This does not even take into account the tax benefits that will be discussed here also.

Stable Monthly Housing Costs
When you rent a place to live, you enter into the agreement expecting your rent to increase each year. If you get a fixed rate mortgage on your home, you have stable housing costs for the next 30 years! Even if you get an adjustable rate mortgage, the changes will stay within a certain range for the life of the loan. Estimates show an average annual increase in housing rental costs of 3%. With a 3 percent annual increase, a current rental payment of $1,000 per month will increase 3% annually, for a total 10 year expense of $137,566….with no wealth gain for you & continued increased expenses! By contrast, a slightly more expensive housing payment of $1,100 per month on a $200,000 home with 10% or $20,000 down will remain constant for those ten years and, with appreciation in value, result in an estimated wealth gain to you of $110,265 after 10 years and steady expenses. Homeownership definitely makes financial sense!

Tax Free Profits
Since 1997, homeowners have enjoyed being able to take a $250,000 profit on the sale of their home – tax free. And that is increased to $500,000 for a couple! You no longer have to replace that principal residence during a certain time period but there are some requirements like living in the home for at least 2 of the last 5 years, so you will need to see your accountant for details. Tax free profits are rare and attractive!

Income Tax Savings
If your home is your primary residence, all of the interest and property taxes you pay in a given year can be deducted from your gross income to reduce your taxable income! Lowering your income tax obligation is one of the many positives to home ownership.