There are two things about finance that I have always let in one ear and out the other.  One is that purchasing a home is the best investment that you will ever make and the other is that you should not work for your money instead have your money work for you.  This posting is going to be the first of a series of two.  In it we will discuss why purchasing a home will be your best investment ever.

There are numerous reasons why owning your own home will be a great investment.  We will discuss money saved from renting, building equity, and tax advantages.  Let’s start with money saved from renting.  Bottom line is that eventually we all have to move out of mom and dad’s and then get a place of our own.

Many of us start by looking for an apartment that we think fits our needs and our budget.  Americans spend on average 30% of their budget on rent (not counting any utilities) according to apartmentliving.com.  That is $900 if you bring in around $3,000 a month.

Can you guess what the average percentage of the monthly budget that people spend on a mortgage?  You are correct it is 30% of their budget.  The best part is that your mortgage is fixed and will always be $900 a month, assuming you have a fixed rate loan.  Rent goes up each year by an average of 5-7% that means next year your rent will be about $945.  In ten years it will be over $450 more than when you first signed your lease!

The next perk is the building of equity.  Equity is the amount of the market value of your home minus the amount you still owe.  For example, if your home is now worth $180,000 and you owe $120,000 you have $60,000 in equity.  That is money that you get to keep after you sell your home.  As you pay off your home you gain equity and also as the market value increases at a similar rate as your rent used to.

The bad part about any mortgage is that we pay so little to the actual principal for a majority of the loan.  Yet it truly is not so bad.  Why?  That leads us into the topic of the tax advantages.  All of the interest on your home loan can be written off of your yearly taxes.  Take that $900 a month mortgage from before and multiply it by 12 months that gives us $10,800. 

Your first few years you spend almost 80% in interest that is $8,640 in interest alone!  That is pretty depressing at first until you realize that you get to claim every penny on your tax returns!  Have you ever claimed that $8,640 a year from your rent payment?  Your landlord will though.

It is a big commitment to consider when you decide to purchase a home.  You are tied in for a long time.  Some say it is risky to buy and that the market is unstable.  I say it is riskier for your financial future to not buy a home.

Please, do your research and make an informed decision before you do anything.  Remember the examples given are hypothetical situations based on data accumulated from the following websites.

http://living.apartments.com/money/how-to-make-a-budget-and-stick-to-it-saving-money
http://www.pueblo.gsa.gov/cic_text/housing/hudhome/sfhhomeb.html

Posted by InspireTomorrow.com