Justifications for Buying a House
The homeownership rate in the United States dipped from 64.20% in Q1 2019 to 64.10% in Q2 2019. If you put things into perspective, though, the latest data does not signify a drastic change in the attitude of Americans toward homeownership. From 1965 to 2019, the average in the country is 65.22%.
Without a doubt, the 2008 financial crisis and the colossal student loan debt pile have put a dent in the popularity of home loans. Nevertheless, the average American would still apply for a mortgage in Orlando or any major city to buy a house when given a chance.
For every good motivation for purchasing a piece of real estate as your primary residence, there could be more reasons not to pull the trigger on it. Below are some of the most notable ones.
Achieve the American Dream
For the longest time, homeownership has been synonymous to the American Dream. Being able to afford an expensive property can give you a sense of accomplishment, a quiet validation that you made it and that your life is a success.
Unfortunately, your American Dream can quickly turn into a nightmare if you pursue it unprepared. If you have no financial capacity to buy a house in cash, then you no choice but to take out the biggest debt of your life, payable in decades.
As of December 2018, four in every 10 retirees still owe money on their house. Almost 10% of those with mortgage debt still owe over $100,000. If you decide to take out a reverse mortgage in your sunset years, there is a good chance that your home loan might outlive you.
If you want a debt-free retirement, think twice before buying a house and taking out a loan. Homeownership does not make sense for everyone, so make sure it aligns with your financial goals to avoid making a regretful decision with lifelong consequences.
To Make Your Money Count
Many tenants want to become homeowners because they are tired of throwing cash on rent. While leasing a place for a long time does not earn you the deed to the property, renting is not necessarily a waste of money.
If you have this mentality, you might be over-focusing on your costs rather than the expenses you are not responsible for. Remember that it is your landlord’s duty to pay for the upkeep of the property, which can be costly.
Unless you are positive you have room in your finances for regular and unplanned home improvements, do not be too quick to take out a mortgage.
To Build Equity
Real estate can be a good source of passive income only if you are renting out several properties. Yes, home equity is an asset, but it does not necessarily make you wealthy.
It is illiquid, plus there is no guarantee it will continue to increase even if you pay down your mortgage accordingly. If house prices drop dramatically due to a catastrophic economic event, the money you tied to your house could vanish quickly.
Security is the only real reason to buy a house if you are not a billionaire or a multi-millionaire. If you think owning your primary place of residence can give you peace of mind, improve your credentials to qualify for the most favorable mortgages on the market and reduce your overall cost of borrowing funds.