According to the annual National Housing Survey conducted in 2003 by Fannie Mae, 84% of homeowners think the best reason to own a home is for the long-term investment. They would be correct. 87% of homeowners say the value of their home has increased since the purchase. These people are also correct, especially if they have owned their home more than five years.
Why Your Home is a Good Investment
Everyone has to pay for their living space and paying a financial institution instead of a landlord means an income tax savings they would not otherwise get. Homeowners are allowed to deduct the interest they paid on their home loan as long as the mortgage doesn't exceed the value of the home. This applies to any living space, which is an area that has a sleeping facility, cooking facilities and bathroom facilities. A condominium, mobile homes, recreational vehicles and even boats fall into this category.
If you sell your home at a profit, up to $250,000 or $500,000 if filling your taxes jointly with a spouse, you do not have to pay taxes on the money made from the sale of the property, provided you owned the property for more than two years.
Your home is an asset that goes up in value. For the past twenty years or so, real estate values have increased approximately 6% annually. In financial terms, that means a home that was purchased 12 years ago has likely doubled in value. Sometimes property values increase more than the national average. This is mostly the result of location. If your home is in a highly desirable location, you are assured of property increases that should exceed national averages.
Inflation is your best friend. While occasionally, there have been declines in property values, if you hold onto your property during the time there is a decline, your value will go up again. Inflation almost guarantees that. As you repay your debt, your wages are likely to increase. Your mortgage payment will not.
While it may not be as exciting as playing the stock market, your home is a good investment in the long run. According to the Federal Reserve, most families in America have 60% of their assets tied up in their homes.
So, your home is not simply your castle, it is your pink piggy bank, too.
