A Word on Investing in a Home

by David Jenyns on June 27, 2008

Purchasing and paying a mortgage on a home is the most common way of investing for most American families. Financially, purchasing a home is an investment if in the long run it either reduces a family’s living expenses or increases the market value of their capital. Will the necessity of paying off a mortgage cause our family to save more money than we would if we rent?

Federal income-tax rules favor home owning over renting. Owning real estate, whether it is one’s home or not, is an equity form of investment. Because home ownership is an equity, if the owner sells he may receive either more or less than he paid for the place. As long as inflation continues, the cost of building a new house keeps rising, and this naturally tends to increase the price of older houses.

Also, a growth in population tends to raise the price of building lots in metropolitan areas.

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