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Buying A Home
Do your upstairs neighbors stomp on your ceiling? Do the meatballs they're cooking next door
fill your apartment with the smell of searing meat? Perhaps you long to sit quietly in your own
backyard after a long day. Buying a home is a big step, but maybe you're closer than you think.
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.
Like Mom and apple pie, 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.
In addition to these intrinsic benefits, 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--it sure beats a passbook.
Bottom-Line Benefits
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.
Remember, 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. This type of mortgage
allows you to continue to live in your home and receive a monthly check at the same time. In
essence you are able to tap into the accumulated home equity and receive a monthly sum which
reflects the amount of that equity and the number of years you wish to receive that payment. In
return for providing you with the payments, the lender receives an ownership interest in the
home. These mortgages sometimes are called reverse annuity mortgages. Ask your lender about them.
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.
Homebuying Means Getting Back To The Basics
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
important, it will be the place that offers you and your family shelter, security and stability.
That's some return on investment.
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