Homeownership Is an Investment in Your Future

There are many people who are thinking about buying a home, but with everything affecting the economy, some people wonder if buying now is a wise decision or if it makes more sense to wait. Bob Brooksmith, chairman and CEO of the Mortgage Bankers Association (MBA), explains:

“I have a strong desire to own my own home. Many potential buyers are waiting for the volatility of mortgage rates to calm down and for a clearer picture of the economic outlook.”

So, if you want to build wealth that will help you succeed later on, it may be time to prioritize buying a home. Whether you rent or buy a home, either way it’s costing you a monthly housing payment. The question is whether you will be investing in yourself and your future or helping others (landlords) increase your wealth.

For most people, getting a secured loan is the biggest financial commitment they can make. Here are some facts that are not considered when considering buying a home.

• If you are now 35 years old and buying your first home, it is likely that at age 60 you will not have a mortgage and will be comfortably situated on a solid asset.
• Within 25 years, your investment is likely to increase significantly. But it’s important not to buy right away as soon as you think about making money. Think of buying a home as a long-term investment.
• Buying a home is a very effective way to save regularly over the years. Even if you never invest in another retirement or investment plan, you are actually saving for the future.
• Owning your own home means you and your family can put down roots, get to know your community and get involved.
• As your family grows and moves into your own home, if local regulations allow you, you will have the opportunity to earn additional income by renting additional rooms and floors.
• If you plan to borrow money from a bank or other financial institution, owning your own home is a definite plus when negotiating.
• You may not need more money than you think to go domestic. Eligible buyers can purchase a home at a discount of at least 5% through the Canada Mortgage Insurance Program (CMHC). You can also use RRSP funds as part of your down payment.
• With many types of investments, you have to pay transfer income tax on the profits you make. If your home is your primary residence, this tax does not apply.

Is a home an investment?

Surveys show that homebuyers view their property as a solid investment. According to a Bankrate survey released in July, real estate will rank second after stocks as the best way to invest in the 10 years through 2020. In Bankrate’s 2019 report, real estate ranked first.

According to the American Association of Realtors’ 2020 Profile of Home Buyers and Sellers, 83% of buyers consider buying a home a “smart financial investment.”

The idea that your prime real estate may be an investment comes from the fact that historically real estate values have been rising. We all know someone who bought property for less than $100,000. And today it’s worth millions of dollars.

Although most financial experts recommend homeownership as an investment tool over stocks or bonds, the only reason is the security associated with the real estate industry. However, the returns are small compared to other investment vehicles.

But get it right. It doesn’t matter. Whether or not the value of your property exceeds inflation, the choice to buy a home should be a personal choice rather than a financial one.

Homeownership vs. rent.

Given the relevant circumstances, buying a home can still be considered favorable. Homeowners have more freedom and creative control over their property, while renters must abide by the property owner’s rules. Owning a home also comes with an economic sense of security. Because you have the option of renting part of your home or mortgaging it in hard times.

Depending on the situation, renting can also be a good choice. Provides flexibility without a long-term commitment. It also gives renters more control over their money. Because they don’t have to take out a big loan and they don’t have to save up for a down payment. They don’t even have to worry about repairs and maintenance. Things like replacing roofs or fixing kitchen pipes can get expensive in the long run.

One thing to consider in the Philippines, especially in metro Manila, is wasted commute time from home to work. Homeowners may limit their job search to nearby offices or suffer hours of daily traffic. On the other hand, renters can easily choose a location near the office for convenience. This, among other benefits, gives renters more free time to relax and spend with their families

When is a house a good investment?

According to the traditional view, buying a house is a good investment because it can bring wealth based on the value of the house, and you don’t have to pay rent to the landlord. When deciding whether to buy a home, you should consider the following:

The amount of the monthly payment to build home equity.

The difference between the value of your home and the outstanding mortgage balance is your home equity. When you pay rent, you accumulate a share for the owner of the home you rented.

However, when you own the property, you pay a secured loan, including principal and interest. The principal component reduces the total amount of the loans each month. This means that without your knowledge, the equity increases.

You can save money by reducing the rent from your budget.

One of the most important benefits of owning a home is saving monthly rent. If you pay monthly rent, that money is gone forever. On the contrary, investing that money in your mortgage increases your equity.

According to statistics, the annual return on a real estate investment, including rent, ranges from 8% to 10%. This return is equivalent to the return you can get from investing in the stock market. Of course, it doesn’t happen in all cases, and your return on investment will be greatly influenced by the city in which you live.

You own assets that can go up in value.

Between March 2020 and March 2021, the average price of existing homes in the country rose 17.2 percent, according to the National Association of American Realtors (NAR). That amounts to about $48,400 in additional equity per year.

As the value of your home goes up, so does your equity, so you can sell it at a profit. The extra money can be reinvested not only in investment assets, but also in new homes. You can also rent your home or use it to generate income through hacks.

Simply buying a home does not guarantee financial stability.

That doesn’t mean that investors can’t make money from real estate. But buying a home as an investment requires a different mindset and approach to home ownership.

If the main goal of buying a home is to provide shelter for your family, stop thinking that your family home is an investment that will one day increase in value. Get comfortable without thinking about the economic return and enjoy having a roof over your head. If you make a profit when you sell your home in a few years, consider it a bonus.

Don’t let your home be your only source of financial stability. You need savings, investments, and insurance first.

Save money and start building a portfolio for other future expenses such as emergencies, education and retirement. Make sure that owning a home leaves little or no money for other living expenses. In any case, if you are always worried about paying your bills, what good is a nice house?

If you already have an adequate down payment but choose not to buy a home, you can make a good return by investing strategically in other places such as mutual funds, stocks and Universal Life variable.