Five Reasons to Buy a House
Here are my top five (financial) reasons why you should buy a house.
1. Low Interest
Short of HECs debt, housing debt has the lowest interest rate available. It’s cheaper than investment loans, car loans, personal loans and way, way cheaper than credit cards. That’s because houses, on average, always go up in value so they are low risk to the lender. Paying less interest gives you more money left to spend or save.
2. Force Saving
Having a loan has the effect of forcing you to save. You can’t decide not to pay your mortgage one month and “invest” in a holiday or a night out instead. If you arrange the repayments so they go out as soon as your salary comes in you may not even notice them (as much).
3. Rent Killer (eventually)
Buying a house means that one day – mostly likely 20 or 30 years down the track – you will stop paying rent. That may sound a long way away but it’s a major saving. But the better news is, you will also have a house that you can sell. If you rent in 20 or 30 years, you will still be paying rent and you won’t own a house. If you own a property, you can also start making money off it straight away by renting part of it to somebody else – a flatmate, Airbnb.
4. Tax Free
Owner-occupied housing is one of the only tax free investments you can make. The rule is, if you live in it, you don’t have to pay any tax on the capital growth in the property.
The biggest payoff of home ownership comes at pension time. That’s because the pension asset test effectively values a home at being worth a little more than $150,000. Your home could be worth $4 million, but for the purpose of determining whether you can get a pension, the government only counts it as being worth $156,500 for a single person or $151,500 for a couple. That figure is based on current Department of Human Services thresholds.