Benefits of Owning Compared to Renting- Good Investment

Initially, 5% may not seem like that much. At times, stocks appreciate much more, and you could earn over 6% with the safest investment of all, treasury bonds.

If you bought a $200,000 house, you presumably did not pay cash for the home but instead financed through a mortgage. Suppose you put as much as 20% down - that would be an investment of $40,000.

At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your "return on investment" would be a whopping 25% annually. Your rate of return when buying a home is higher than most any other investment you could make.

Income Tax Savings

Because of income tax deductions, the government subsidizes your purchase of a home. All of the interest and property taxes you pay in a given year can be deducted from your gross income to reduce your taxable income.

For example, assume your initial loan balance is $150,000 with an interest rate of 8 percent. During the first year you would pay $9969.27 in interest. If your first payment is in January, your taxable income would be almost $10,000 less - due to the IRS interest rate deduction.

Property taxes are deductible, too. Whatever property taxes you pay in a given year may also be deducted from your gross income, lowering your tax obligation.

Stable Monthly Housing Costs

When you rent a place to live, you certainly can expect your rent to increase each year - or even more often. If you get a fixed-rate mortgage when you buy a home, you have the same monthly payment amount for 30, 20, 15 or 10 years. Even if you get an adjustable rate mortgage, your payment will stay within a certain range for the entire life of the mortgage.

Forced Savings

Saving money can be a big challenge for some people, but with a house, you have an automatic savings account. You accumulate savings in two ways. Every month, a portion of your payment goes toward the principal and the equity increases.

Second, your home appreciates. Average appreciation on a home is approximately 5%, though it will vary from year to year, and in some years, it may even depreciate. Over time, history has shown that one of the very best financial investments is owning a home.