Buying a home is one of the most exciting times in a person’s life: you’re building the foundations of your future and investing in an asset that will guarantee your security for many years to come.
However, it’s important to understand exactly why it’s such a valuable asset before you sign the papers and pick up the keys.
This article will give you an even greater appreciation for home ownership and give you the knowledge necessary to feel confident in your decision to join the ranks of homeowners.
Home ownership is security against uncertain market forces
Unless you work in the financial industry, you may not think much about the market other than how it impacts your everyday purchases, like gas and groceries. It’s easy to get frustrated with sticker shock on eggs and bread without considering how you can use that to your advantage and secure a future for years to come.
First, let’s think about the differences between purchases and assets. Essentially, certain purchases have little to no resale value, as they’re meant to be consumed or used until they wear out. On the other hand, assets have resale value, and they can either depreciate or appreciate over time.
Except in very certain circumstances, things like cars and boats are depreciating assets, but others are appreciating assets, like houses and gold.
When you have appreciating assets, inflation means that they have developed even more value; when they’re sold, they generate income for the seller.
Real estate is considered one of the best investments for everyone, from the average homeowner to multimillionaires, as it consistently outperforms other investments and rises faster than average inflation.
For you, that means that you’re setting yourself up for a good windfall in the future – as well as giving you a safe and comfortable place to live.
Building equity protects you against future market conditions
Following the previous point, houses build equity; in other words, you will almost always sell it for more than you paid for it.
Equity is how much your home is worth now, subtracting how much you still owe on the home. For example, if your home is worth $300,000 right now, but you owe $100,000 on the mortgage, then your equity is $200,000.
Of course, the equity goes up the more you pay on the mortgage, but it also goes up as real estate prices rise, and this will earn you a profit in the future.
Let’s say that you bought your home for $300,000, paid off the entire mortgage, and then continued to live there for another ten years.
In those ten years, your home went up in value by $100,000; this means you’ve made a little under $100,000 in profit, minus the interest rate on the mortgage.
With an extra $100,000 overall, you can invest in other assets, pay for a new house, or place that in savings for the future: you’re better off no matter how you cut it.
If you choose not to purchase a home, you will still pay to live somewhere, but rent doesn’t build equity, nor does it build your credit; you’re spending money but getting nothing but housing in return.
While of course having a place to live is very important, you can do more with your money by owning instead of renting.
Affording a mortgage often scares people, but it doesn’t have to be so intimidating: by working with District Lending, you can get a great interest rate on the home of your dreams.
In some cases, you might even be paying less than you did in rent while still building equity and working toward your financial goals. But there’s another benefit to owning a home, which is that you can refinance in the future to pay even less.
When market conditions change, you can refinance
In simple terms, refinancing is when you open a new loan that covers the old one, but has a lower interest rate. There are many benefits to refinancing, but the most important one is that it can get you a lower interest rate on your mortgage.
With refinancing, you can “marry the house but date the rate,” meaning that when you purchase a home, you’re not committed to that interest rate forever.
When a new interest rate is available, you can repackage your loan into a new one with a lower interest rate, which can save you thousands of dollars over the long term.
This can also be used if you originally chose an Adjustable Rate Mortgage (ARM) but then interest rates then went up; you can select a fixed-rate mortgage with a lower interest rate, and then never worry about changing rates again.
Mortgage brokers can help you find a great interest rate when you first open a mortgage, but they can also help you refinance so that you’re taking advantage of the best rates available on the market.
Some will even notify you when interest rates drop so you can take advantage right away, and they’ll make the process a total breeze no matter your situation.
A new home is the key to a great future
Purchasing a home is one of the very best financial moves you can make for your family and your future. With security, equity, and savings possibilities, you should always consider owning instead of renting if you can afford the down payment and other costs.
Keep this in mind as you examine your own budget, and you could find yourself in a wonderful new home sooner than you ever imagined.