We get it. You’re just starting out. You’ve got student loan payments to make. You’re still weighing your options. There’s a lot to consider when you’re thinking about where you’re going to live your life and maybe you’re not sure if you want to be tied to one location at this point in your life. Buying a home might not be on the top of your priority list. But, there are some major benefits to home ownership that you might consider. The last thing we’d want to do is rush you or give you some sort of high pressure sales pitch. These ideas are intended to give you something to kick around when you’re thinking about your future. If you ever have any questions about real estate, please feel free to call us and ask away. That being said, let’s take a look at some of the most pressing reasons real estate can be a great way to invest as a person under 35.
The word equity gets thrown around a lot in the world of real estate, but what does it mean? When you purchase a home, you’ll have to take out a mortgage unless you’ve got a bunch of cash available. As you make your monthly payments, you start to build equity in your home. In the plainest terms, it’s the value of the home that you’ve secured through those payments plus the appreciation of the property value. To contrast this, let’s talk about rent for a minute. When you spend your money on rent, it goes to the owner of the property and that’s where it stays. There’s nothing wrong with renting, but it’s money spent that doesn’t create value for you in the long term. If you purchase a home, you’re essentially spending money each month toward a valuable asset that will continue to gain value over time.
When you’re young, it can be difficult to improve your credit rating because you may not have a ton of history with borrowing. Owning a home can improve your credit very quickly if you maintain it. It’s not uncommon to see a 50 point swing in the following weeks of purchasing a home. Now, it does require a decent score to begin with to secure a mortgage, but you can always speak with a mortgage lender for a process called pre-approval. In this meeting, your lender will let you know where you stand and what you can do to improve your score before you decide to purchase a home. Overall, home ownership is a great way to build credit, but be sure you stay on top of it and you’re only borrowing what you can afford!
Despite a recent increase in interest rates and speculation on more rate increases this year, it’s still a good time to secure a mortgage. Historically speaking, rates are still very low. Back in 2000, rates were double what they are now. Even further back in 1980, they were all the way up to 17.5%! We’re not anticipating a return to rates quite that high, but an increase could be coming. Low rates mean it’s easier to pay off your mortgage faster.
How much are you really spending on rent over the years?
Let’s say you buy a home for $144,900 in Springfield and you get a 4.5% interest rate on your mortgage. If you can secure a 10% down payment, your monthly mortgage payment would be right around $770/month. That’s just $50 more than the average rent in Springfield as of January 1. Owning a home is not necessarily more expensive than renting and as we mentioned earlier, it’s a much more effective way to spend your money in the long term.
When you own a home, it’s yours. You can have pretty much whatever kind of pet you want. You can re-decorate, remodel or renovate to your heart’s desire. It’s yours and you can make it exactly what you want. Not only will you feel more comfortable and proud at home, it could also improve the value of your investment! The freedom afforded to homeowners is vast and it can be a really rewarding experience to make your house into something you love.
If you ever have any questions about real estate or first time home buying, please feel free to give us a call at 417-823-2300 or contact us at murney.com/contact-us. We’ve worked with first time homebuyers for a long time and we understand what it’s like to make a decision as important as purchasing property. We won’t pressure you or try to rush you into anything. We’ll act as your adviser and help you along the way, whenever you’re ready!