This is an attempt to list some of the positives of owning a home. For the opposite point of view, check out the post titled Be Logical and Never Buy a Home.
Deciding to buy a home is a major decision that everyone eventually wants to make. If we consider everyone we know, it will be apparent that people who own a home are generally more comfortable. There’s a sense of family and accomplish when we live in our own home. Here’s a couple more reasons why we all want to buy a house.
30 Years and We Are Done Paying for the Majority of the Expenses
There are situations when renting makes sense, but renting also means that we will be paying rent our entire lives. Getting a 30 year loan, on the other hand, means that we will be done paying for our mortgage in 30 years as long as we don’t serially refinance. Once the 30th year hits, our expenses will go way down, which gives us more freedom to consider early retirement.
Real estate isn’t guaranteed to increase in value, but those who bought houses a decade ago still like saw increases despite a housing catastrophe since 2006. I just saw a house on sale for $1.8 million today that was purchased for $700,000 with a 5% down payment. This meant that their original $35,000 investment in 1998 turned into more than $1 million dollars in profit 14 years later. There aren’t that many investments with such a high return, and the only way this is possible with real estate is because of the degree that companies allow us to leverage.
The buyer in our example only put down $35,000 for a $700,000 house. This means that they are borrowing $20 for every dollar that they put in. In the stock market, the most we can borrow is $4 for every dollar that we own if we day trade and more likely $2 if we are holding our investments long term.
Buying a House Forces Us to Save
There is no better way to get us to save than having a mortgage payment. As we pay off our mortgage, we are also building equity over time. It’s the same theory as “pay yourself first” because bills usually take precedence over spending. It may take years or even a decade or two, but through time, those payments that we’ve been dreading becomes a ton of equity.
The Needed Pressure to Make More Money
With high bills actually comes pressure for us to work harder and make more money. It’s another psychological trick but this definitely works. If we don’t need the money, we wouldn’t really be working to earn more. I remember my former boss once told me that having expensive tastes is a good sign for a sales person since it meant that the lavish spending will drive them to work harder. Like the saying goes, “if there’s a need, we will find a way” and having a mortgage payment due every month definitely creates this “need”.
It is Not About The Money
Many people will echo this, because buying a house is not always about making money. The joy of owning a home, having a place we can call our own and giving our children a stable environment to grow up in cannot be measured in dollars. The uncertainty of renting and the need to move every few years because of unforeseen circumstances can only mean more energy wasted on something completely avoidable.
We can be logical all we want but all logical approaches assume that a good deal of our assumptions will play out. If we are human, we should make sure that we will live a happier life and just buy a home.