Deciding to buy your first home is never an easy decision. It’s a big financial investment and though you have planned and saved for the moment, it’s all too easy to convince yourself you aren’t financially ready or the market conditions aren’t just right. But that fear or hesitancy is costing you money in the long run.
To overcome that anxiety and move forward with buying a home, think of it as more than a financial commitment or monthly payment. Think of it as an investment in yourself for your future because at the end of your mortgage long term, you will own a home that you will be able to sell for a profit if you choose. If you keep paying rent over that same term, all you are doing is giving away your money and getting nothing of value in return.
You can almost be sure you would make money on the sale of the home at any point because home values continue to appreciate. Data from the Federal Reserve over the past 60 years shows that home prices have steadily climbed (with the exception of the 2008 housing market crash). There are very few assets aside from real estate that have appreciable value.
That appreciation means your investment in the home will help you build your personal net worth which gives you some financial freedom in the long run. As the values of homes rise and your mortgage balance decreases, you build equity in the home. That equity is a personal financial asset that can be left to grow or used depending on your needs.
While considering these points, also keep in mind that rent keeps going up and is expected to continue to rise over the foreseeable future. iProperty Management data shows rent has increased by almost nine percent per year since 1980. Those increases actually outpaced wage inflation for most of those years.
For many people, this means the cost of rent is higher than the monthly cost of a mortgage. So, if you are paying rent, not only are you paying more than you would for a house note, the money you are dishing out every month isn’t providing any extra value, like the equity it would build if you were putting it towards a home.
Also, when rent prices rise unexpectedly, it can wreak havoc on your wallet and budget. With a mortgage you know what your payment is going to be every month, so home ownership gives you greater financial security.
In short, buying a home is an opportunity to invest in yourself, gain financial security, and build a better financial future. You are never getting your rent money back, but the money spent to own a home will provide a return on investment down the road. Until then, you get to enjoy the sense of pride that comes from owning the home you have always wanted.
