For the vast majority of us, owning a home is part of the American Dream.
According to a study conducted by the NATIONAL ASSOCIATION OF REALTORS®, 87
percent of those polled cited owning a home as the number one criterion for
defining "the good life." Owners and renters alike considered homeownership
desirable for the following reasons: the pride of ownership, their dislike
of paying rent, and the ability to change features of their homes to match
their individual tastes and needs.
In addition, owning your own home provides a sense of security and
well-being that's hard to beat. Home is where we raise our families, have
friends over for summer barbeques, paint the baby's room pink or blue, and
find refuge from the outside world.
Owning a home offers other advantages as well. For instance, as a
homeowner, you have control over your environment. Not only can you change
your home to meet your needs, but you also aren't subject to the terms of a
lease or a landlord. As a homeowner, you can experience the emotional and
financial security that comes from knowing what your housing expenses will
be from year to year. Unlike rents, which can increase annually, most
mortgages have fixed or capped monthly payments. So, as a homeowner, you
can have a much better idea of what proportion of your paycheck goes toward
your home. Think of it as the ultimate savings plan.
And it only gets better. Homeownership is the primary component in the
creation of wealth for many Americans. Data from Harvard University's Joint
Center of Housing Studies illustrate not only that the median net wealth of
homeowners is 34 times greater than that of renters, but also that over
half of that wealth is generated from home equity. As you pay down your
loan amount each month, you accumulate equity, a growing ownership interest
in your property. If you need funds, you can borrow against this equity in
the form of a home equity loan. Further, interest on a portion of home
equity is tax-deductible.
Most homes appreciate in value over time and can be a source of income for
you, especially if you've lived in your house for many years. When you
retire, you can sell your home if you need the funds or make use of a home
equity conversion mortgage.
Finally, don't forget about the significant tax advantages of owning your
home. Interest on a home mortgage and property taxes are deductible. For
most of us, mortgage interest provides the largest tax deduction. Also, a
home is the single most important factor that determines whether you will
be able to file a return which takes advantage of the wide range of
allowable itemized deductions.
Recently, the CALIFORNIA ASSOCIATION OF REALTORS® surveyed homebuyers to
find out what they considered to be important in the purchase of their
homes. The largest percentage, 27 percent, considered the mere ownership of
a home as the most important reason to buy. Moving to a better neighborhood
(17 percent), wanting a larger home (10 percent), and realizing the tax
advantages of homeownership (8 percent) were other reasons cited for buying
homes. Seven percent focused on investment value as their primary
motivation for homeownership.
Over the years, your home likely will be the best investment you'll ever
make. But more importantly, it will be the place that offers you and your
family shelter, security and stability. That's some return on investment.