Mortgage Blog

How Does Homeownership Rate as an Investment Strategy?

Personal Finance

Is a home a better investment than other options, such as your 401(k)? Now that you have picked your jaw up off the table know that this article is not exactly discouraging homeownership here – we are taking a pros and cons look at homeownership as an investment, with the understanding that a home is just as much practical shelter as it is a sound investment.  With the financial crisis of 2008, which was set off by bursting the housing bubble, in the rear-view mirror, it is a healthy exercise to examine exactly what kind of financial “asset” a home can be.


A home isn’t exactly a “liquid” asset.  Compared to a stock portfolio, which can be cashed in at a moment’s notice when needed, a home doesn’t work quite so well as an emergency fund.  To access your equity requires either a refinance, or a home equity loan, or an outright sale of the home, all of which take time.  The lesson here is that a sound investment strategy means making sure your eggs aren’t all in one basket.  Additionally, if you plan to move in just a couple of years, you might not be ready yet for homeownership. Maintenance is your problem.  Seems like an obvious one, but bear in mind that when you sell your home for a “profit,” that doesn’t include all the upkeep and upgrades you’ve made over the years.  While you’ll enjoy that new countertop or light fixture, cautions that most upgrades don’t “pay off” (100% return) when the home is sold.


Lock in your housing costs.  Nothing worse than living in fear that your landlord will raise your rent.  Nothing like the comfort of a 30-year fixed rate mortgage – knowing what your housing costs will be for the next three decades. Build wealth.  Home values appreciate over the long term, so you should be able to count on at least a 1% average growth (including inflation).  While that’s not a get-rich-quick plan, consider what happens to your housing costs when your renting.  You’ll never get that back while owning a home is a way to slowly, but surely, build lasting wealth.  Owing a home is also sort of a “forced” savings plan.  You’ll add to your net worth each month, and eventually own a very valuable, tangible asset. Tax time = happy time?  If you itemize your taxes, owning a home can be a huge advantage as you’ll be eligible for the property tax and mortgage interest deductions.  Additionally, most profits from the sale of a home ($250k for individuals and $500k for couples) are not counted as taxable income.

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