Do you see your home as an investment? You should. Buying a home is one of the biggest decisions that you’ll make in your lifetime and it’s not one you’ll regret.
Deciding when to jump into homeownership might sound intimidating, but we have some useful tips to guide you.
Money in Your Pocket
Face it, renting is expensive. RentCafe.com says that renting a home in Eugene will cost $1324 for a 892 square foot apartment. Comparable homes average $270K and using a mortgage calculator for a home in that price range finds a 30-year mortgage with a 20% down payment for a $1194 monthly mortgage payment. That’s a $130 per month savings and you’re funding your future, not a landlord’s.
You can deduct the amount you paid in interest to your mortgage company when you file your annual taxes. It requires itemization of your taxes, but it’s well worth the additional time (and money, if you pay someone to figure your taxes). Because the newer the mortgage, the higher the interest payment, homeowners with newer loans tend to enjoy the greatest tax breaks. You can also deduct the points you pay for your loan, so think about buying now and you can start saving on taxes as soon as 2019.
Return on Investment
Home values keep going up and it’s unlikely they’ll decrease anytime soon. Why wouldn’t you think of your home as an investment and plan your future around it? Plus, every year you live in your home and make your mortgage payments earns you more equity. That’s real savings that you can liquidate if you need to pay for college, retirement, or just upgrading your home.
Current interest rates for a 30-year mortgage is 2.61%. Years of record-low mortgage interest rates have given many a false sense of security, in thinking that rates will always be low. The fact is that before Covid-19 hit earlier this year, mortgage rates were rising. In October 2019, the rate was 3.65% and in February 2020, they were 3.81%. While rates may continue steady for a short time longer, there’s no guarantee of sustained lower rates. The time to buy is now!
Flexible Down Payments
There was a time when it was standard for banks to require a 20% down payment before financing a mortgage. While that standard still exists in many situations, there are far more options for buyers these days. Government lenders like Fannie Mae and Freddie Mac offer loans for as low as 3-3 ½%. The Department of Veterans Affairs (VA) makes mortgages available to qualified beneficiaries for zero down. If you invest in your home with a conventional loan, your lender may still require a large down payment. If you can afford it, that’s not at all a bad thing. The more you pay down, the lower interest rate you’ll get, and the less you will finance over the life of your loan.
And Most Importantly?
It’s yours! You can do whatever you want! Paint your house pink. Landscape it with the flowers, trees, and shrubs that you love. Make your garage bigger. Add a deck. And remember, with your home as an investment, everything that you do to increase its value goes right into your own pocket!
The Bottom Line
Stop dreaming of homeownership and just jump in with both feet. You have nothing to lose and everything to gain by giving up the home rental/leasing game and treat your own home as an investment.