If you’re considering becoming a homeowner, you may wonder whether purchasing a home is a good investment. The answer is that it depends! Many things should be considered before taking the leap to purchase a home. With rapidly changing market conditions and varying personal financial situations, it is important to carefully evaluate your specific circumstances to determine if it’s the right step for you. Here are some things to consider regarding the investment value of buying a home.
It’s important to note that owning a home comes with more costs than just the mortgage payment. Homeowners should anticipate the additional costs of taxes, insurance, and any repairs the property may need. If these costs total more than the home is worth—or what it could be sold for in the future—purchasing that specific property may not be a wise investment. It is also wise to get a home inspection before buying a home. Having an inspection can help buyers avoid high-dollar repairs caused by damages to integral parts of the house, like its plumbing, foundation, or roofing.
The biggest reason why so many people think buying a home is a good investment is equity. Equity is the value of the property, net of debt. In other words, it is the amount of your home that you own minus what you owe your lender. While paying rent is an unrecoverable loss each month, when paying a mortgage, that money increases the owner’s equity with each payment. Think about it like putting money in a savings account each month! In fact, the Federal Reserve estimated that homeowners have about a 40x higher median net worth than those who rent.
Home values generally increase at a consistent rate over time. Therefore, if homeowners retain possession of a home for at least three to five years, that should be enough time to recoup closing costs and potentially result in a slight profit if they choose to sell.
If you can manage the additional costs of a home, want to build equity, and can wait for your home value to increase before selling, buying a home may be the right investment for you! The lending team at Coastal Custom Mortgage is ready to help. Get in touch today to get started, or visit us online to check out our mortgage loan programs.