The decision to quit renting and buy your first home is the single most important financial decision most people will ever make. That’s because — at least for most folks — a home purchase is the biggest financial investment they’ll ever make. Rest assured of this, though: “Big” doesn’t equal bad. Far from it. In fact, becoming a homeowner is one of the wisest things you could ever do for your future. Not only does buying a home mean having a place to call your very own; it’s also one of the best ways to increase your financial value. Here are three quick reasons why you’ll be forever thankful for the day you left the ranks of the renters and joined the club of happy homeowners.
First up: a definition. Home equity is the difference between the amount of money a homeowner owes on their mortgage and the amount of money their home is currently worth. So, for example, if you purchase a $250,000 home and pay down $50,000 of the principal mortgage balance, you have at least $50,000 in home equity. Pay off the whole balance? You’re $250,000 to the good — at a minimum. With home values on the rise, chances are your home is probably worth a good bit more now than it was on the day of your purchase. So if your home was paid for and you died, you’d be leaving the beneficiary of your estate the amount of money you originally had in home equity and then some.
Let’s not be too morbid here, however. Maybe you have a growing family or crave a bigger home office. One of the best ways to upsize is to hit the market armed with a good amount of equity in your current home. Not only are you likely to be approved for a bigger loan, but you’ll be able to sock a significant amount of dough to your next down payment.
2. Peace of mind
Heaven forbid you fell on hard times, you could sell your home and profit the amount you had in equity. This would likely be enough cover a nice down payment on a more affordable home. And you’d even have money left over. But what if you fell on hard times as a renter? Obviously, you don’t own the property, so you therefore have nothing to sell. That means no equity to fall back on.
Once you’ve bought a home and made a few payments, you can go to bed each night with the peace of mind that your home equity will serve you well when or if you ever need it. In all likelihood, you will need it at some point. For every month that you continue renting, it’s costing you a month’s worth of home equity. Just stop and let that sink in for a minute. But the good news is you don’t have to keep flushing money down the toilet.
3. Cost savings
Fueled by relatively low interest rates from a historical context, home prices continue to soar nationwide. By purchasing now — as opposed to perhaps three or six months from now when home prices could be even higher — you’re likely to save a sizable amount of cash.
Also consider this: While renting might feel like the safer option, it actually isn’t. Virtually all renter’s leases come with some of type of clause (usually written in fine print). The clause probably states you have to pay the landlord an extra fee to exit your lease early. But what if you don’t have this extra cash just laying around? You’re kind of stuck. For homeowners, no such hurdle exists. You can sell and leave on your own terms. Who doesn’t want that kind of flexibility? At the rate homes are being devoured by hungry buyers, you won’t have any problem selling. And that’s unlikely to change any time soon.
If you’re on the fence about buying a home, jump on over. If you’ve never considered a home purchase, you now have several important reasons why you should. But the choice is yours. Let our trusted mortgage advisers at Fairway of the Carolinas guide you to the perfect loan for your unique financial situation. When it’s all said and done, you can kiss renting goodbye and grab the keys to the home of your dreams. What’s not to love here? Contact us today. We look forward to putting you on a clear path toward homeownership and saving you bucketloads of money in the process.