Mortgage as an Investment
Read up on the home ownership benefits of buying a home
Most Americans have long thought of their mortgage investment in a primary residence as the single most important investment they will ever make — and for good reason. For decades, housing prices continuously rose. But, inevitable market fluctuations reminded consumers that markets can go down just as quickly as they go up.
But what does that mean for you? Is buying a home still a good investment? In many cases, perhaps most, the answer remains “yes.”
Why a mortgage is still a good investment
The mortgage interest tax deduction — the ability to deduct the interest you pay on your mortgage from your overall tax bill — makes home ownership an attractive investment. And since you’re paying much more interest than principal at the beginning of the loan, your allowable tax deductions are even larger in the early years of your loan. As long as this deduction remains in place, it will continue to be one of the most powerful home ownership benefits. Be sure to consult your tax advisor or visit the IRS website for current eligibility details.
Additionally, owning property gives you equity. If you’re paying rent on a home or apartment, you’re earning nothing in exchange for your money. Owning your home for several years and continuing to make your mortgage payments will mean you can someday use that equity should you need to. This additional spending power in the form of a home equity loan or home equity line of credit is only available to people who own their homes.
Remember that home ownership is a long-term investment
Typically buying a home and securing a mortgage is not a very attractive short-term investment. Taking into account real estate agent commissions (generally at least three percent of the sale price), closing costs and other upfront transaction costs, experts say it generally takes as many as seven years before a homeowner earns that back and home ownership begins looking like a good investment.
Be sure you bear this in mind when considering purchasing a home. And, because housing values are not guaranteed to rise, your choice of home is critical to making a sound long-term home ownership investment. Look for a home that’s situated in an area where it’s likely to appreciate in price — meaning one in a neighborhood, city, region or state with rising prospects and a strong economy.
The bigger picture is this: markets rise and markets fall. Prevailing interest rates, which will directly affect the rate you will pay on your mortgage loan, also rise and fall based on a number of macroeconomic factors. But, you need to focus on the long-term home ownership benefits. What have been the long-term trends on housing appreciation in your neighborhood, city and region? What’s driving prices in your area? With pertinent real estate data and statistics more readily available now than ever, you can have this crucial information close at hand when it comes time to make your home-buying decision.
Learn more about home ownership benefits that you can enjoy
Whether you’re researching buying your first home or have already found the home of your dreams, we offer the tools and information to help you make the right borrowing choice. You can learn more about various Citizens Bank mortgage options or call one of our Citizens Bank home loan advisors at 1-888-514-2300.