People of a certain age and stage are often advised to invest in real estate and buy a house. But navigating this monumental financial decision amid a changing housing market and rising mortgage interest rates and home prices has many potential homebuyers, especially first-time buyers, wondering whether they it's still worth it.
As a whole, experts largely agree that buying a house continues to be a good investment for those who are ready, but the ultimate value you get from purchasing a home will depend on various factors — including where you want to buy, your finances, and your long-term goals (like if this is your forever home vs. a real estate investment.)
Buying a house is an emotional investment: Your home is your family’s refuge and serves as the focal point of many of life's greatest milestones. But it’s also an important financial venture — one that will likely be the greatest driver of wealth for yourself and those who you pass on your legacy to. Buying a house can be a good investment for your children's future. According to data from the Federal Reserve, the net worth of homeowners was 40 times greater than that of renters.
→ Understand the pros and cons of renting vs. buying
One of the reasons why homeownership drives wealth creation is because of the forced savings that come with buying and owning a home. Think of it this way: When you rent, your monthly payments only go towards housing you for that month. When you buy a home, every mortgage payment is an investment in your home’s equity, that will compound as your home appreciates.
If you choose to sell your home one day, that equity will be money in your pocket that you can put towards other big expenses, like buying another home or retirement. For those who struggle to put money away or invest, buying a home can act as another long-term savings method.
Related: Should you break a lease to buy a house?
If you pay a lot of taxes every year, you can use your home as a way to get your hands on some tax benefits. Let’s look at a few tax breaks that homeowners can qualify for.
Mortgage interest tax deduction: If you are married and own a home, you can deduct the mortgage interest you pay on the first $750,000 if you file jointly or on the first $375,000 if you are married and filing separately. Higher limitations can apply if you deduct mortgage interest from a mortgage that you accrued before December 16, 2017.
Mortgage tax credit: Lower-income households that earned a qualified Mortgage Credit Certificate (MCC) to buy a home can get a tax credit worth 10% to 50% of the mortgage interest they paid that year.
Buying a home when you’re young and working towards paying off the mortgage is a great way to save for and prepare for retirement. By paying off a mortgage during your working years, you’ll have more financial flexibility when it comes time to retire.
One of the main perks of buying a home is that, eventually, you’ll own it outright. This is a huge benefit, especially if you’re able to arrange paying off your mortgage before you retire. Once you pay off your mortgage, your monthly housing costs will drop, and you’ll be able to stretch your retirement savings and income further.
You’ll also have the option of selling your house and downsizing. Once your family is grown, you can choose to move to a smaller house, and if you’re not working you can move further away from pricey cities and to the suburbs.
While renting can be convenient when you need a repair or want some flexibility in your life, renting can also put some major limitations on how you design your living space. When you own your own home, you can paint rooms whatever colors you like, use nails to add art or shelves to the walls, and can renovate to your heart’s desire. (Certain renovations might even increase your home’s value.)
The National Association of REALTORS® Research Group’s 2019 Remodeling Impact Report found that after they remodeled, 74% of homeowners felt a greater desire to spend time in their homes and 65% felt increased enjoyment in their homes. Roll up your sleeves and spend some time watching HGTV, so you can show your home (and yourself) some love!
If you want to have kids, move an elderly parent in, or are hoping to welcome a pet or two to the family, buying a home gives you room to grow your family. It can be hard to find affordable rentals that are large enough to house a full family, and many don’t allow pets. Buying a home can help you design a life that suits the needs of you and your loved ones.
When you work with Orchard, we'll pair you with an experienced local real estate agent to help you find your dream home. If you need to sell your house, then we can help you line-up closing timelines and make a non-contingent offer.
Unlike driving or buying your first drink, there’s no age requirement to break into real estate. If you’re wondering if you should buy a house, here are some factors to consider and signs that you're ready:
Related: Is now a good time to buy a house?
While there are benefits to investing in real estate right now, that doesn’t mean now is the time for you to buy a home. Let’s look at a few of the factors that can help you determine if you should or shouldn’t buy a home.
Buying a home can cost a pretty penny once you add up all the expenses that come with purchasing and maintaining a home. You’ll need to make sure your budget not only accounts for the expected expenses like a down payment and mortgage, but also for these less often considered closing costs:
Crunch the numbers to make sure buying your dream home won’t harm your financial health.
→ Here's how to save for a house while renting
Ideally, you’ll spend many happy years in your home, so it’s important to wait until you find the right home in the right location. Consider how close you will be to work, how the local schools rank, and generally what your life would look like in a specific neighborhood before you put an offer on a home.
You’ll also want to do some research to see if you’re buying a home in an area that has the potential to increase the value of your home over time. Buying in a less desirable area can help you save on housing costs, but may also limit how much of a return you’ll get when it’s time to sell your home.
Last, but certainly not least, you need to wait until you find the right house for you and your family. If you have a dog, you won’t want to scrimp on a backyard. If your parents live out of town, a guest bedroom is a must. With more and more people working from home these days, a lack of home office space may very well be a deal breaker. To avoid buyer’s remorse, be patient and hold out for the right home.
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We provide peace of mind that your home will sell, plus list your home on the market to maximize your earnings.
Use our home sale calculator to estimate your net proceeds.
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