How to Look at Your Home As an Investment

Are you looking for a home for sale in Nashville? If so, you should consider if the home you’re purchasing could be a smart long-term investment. According to Seeking Alpha, on average, buying a home typically gives buyers an internal rate of return between 7 and 14%, depending on your local housing market and tax considerations. Becoming informed about the home purchasing process can help you to make the best possible decision for your situation and help you get a greater return on investment.

Home keys resting on a table

Why Purchasing a Home Is a Good Investment

Homeownership has been a goal for generations of Americans and is believed to be the safest way to build wealth for average citizens. While the 2008 financial crisis might have shaken this idea, the foundation has stayed strong. Despite the risks, the return on investment this purchase can bring shows buying a home is still a strong long-term investment.

Increased financial security over time

Historically, a home’s value increases over time. This increased value can be used to give you extra financial freedom in a multitude of ways. For example, say you bought your home and paid off your mortgage by the time you retire, you could sell your home and collect a lump sum of cash that could give you much more flexibility. Additionally, you can borrow against your home if an emergency ever arises, and paying your mortgage every month on time helps to improve your credit score. This makes it easier for you to get loans and credit cards as well as other forms of financing. Another benefit of owning your home is as rental rates rise, your Principal and Interest amount will remain constant over the life of a fixed-rate mortgage.

Positive tax affects

Purchasing a home can help you save big during tax season. Under the current U.S. tax code, both property and mortgage interest are tax-deductible. With the exception of married couples filing separately, all interest paid on a first or second mortgage up to $1 million is tax-deductible for all taxpayer categories. But married couples that file their taxes separately can still deduct mortgage interest up to $500,000. Speak with your financial advisor or tax expert for more information on the tax benefits of owning your home versus renting.

When Is the Right Time to Purchase a Home?

Part of making a sound investment is knowing when to buy. When looking to purchase a home, potential homebuyers should pay close attention to mortgage rates and if the values of homes are rising or falling. It’s also essential to purchase a home only when you know you can afford it. Just because mortgage rates and home values are in a good place doesn’t mean you should jump into something you can’t afford. Additionally, to qualify for a prime residential mortgage, you must have a high credit score and be mostly debt-free, according to the Federal Reserve. Prime residential mortgages also require a downpayment starting as low as 3.5% of the sales price, plus closing costs, which are, as a general rule, 3% of the sales price. With all of this in mind, the right time to purchase a home is when you are financially ready. Every person’s circumstances are different; make your decision when it’s best for you.

Explore Your Options With HND Realty, LLC

Are you having trouble finding a home that meets all your standards? HND Realty, LLC is here to help. We craft quality communities in and around Nashville, Tennessee, ideal for homebuyers of all types. Our experienced team can help you find your forever home in one of our well-crafted communities. Our founders, Bill Hostettler and Carl Neuhoff, are both proud Nashville natives that take pride in helping to build long-lasting housing in the Music City. To learn more about homes for sale in Nashville and all the services we provide, contact us today.

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