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Home Investment - When and Should I Buy a House?

In order your investment portfolio construction turns to a successful asset you should include as a component the saving for a down payment on the purchase of a house. This should be done in order to eliminate an expense in terms of the rent you are currently paying into an asset. The good thing about this home investment is that the interest rate on your mortgage loan is deducted from the taxes you pay. Additionally, if you are single and sell the home at a profit, you will benefit from a capital gains tax exemption of $250,000. In case you are married, this sum is increased to $500,000.

What makes an investment in a home even more attractive is the fact that generally the value of your home appreciates at 3 to 4% every year. Additionally, they are purchased with a 20% down payment.

For instance, if you have purchased a house that costs $200,000 your down payment will be $40,000 (which is 20% of the total value of the house). This sum represents a cash investment. As a result, every year your house will appreciate with approximately $6,000 to $8,000.

Therefore, you get three benefits by making just one hit. First, you obtain an investment that has practical uses. Secondly, you automatically diversify your asset allocation into real estate. Finally, as can be seen from the previous example your home produces you comparable and stable returns.

Incurred Home Costs

Despite the many benefits that such a home investment provides, it does come with its expenses. Let's look at the other side of the home.

You will have to first consider the private mortgage insurance that is obligatory to make. Such insurance is required in case the cash investment you have made is less than 20% of the value of the home you have purchased. Additionally, you are subject to another insurance, which is the homeowner insurance. An additional cost that should be considered is the obligatory property tax to which every owner of a home is subject to.

You should also have in mind that you will incur such expenses as utility bills and home repairs. The latter includes costs surrounding the repair of appliances or damaged heating system. Finally, you will have to take care of the lawn in front of your home, which represents an additional expense that should be covered.

Despite these additional costs, home investment still represents a profitable investment, which should not be ignored just because of the expenses you would otherwise pay if you lived in someone else's home.

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