First of all, I have a disclaimer. You should not buy a house just because some random person on the internet, like me, says you should. I see so many people in the real estate industry, whether they're real estate agents or loan officers, pushing people to buy homes when it's not a good plan for them right now.
So if this isn't, you don't feel pressured into buying a home just because so many people say you should. You have a timeline that works for you. You're on your own timeline. Not everybody else's. Don't listen to the noise, listen to the plan that works for you, and execute that.
What we will talk about are some benefits. Why do people talk about why buying a home is so great? All right, let's go ahead and dive in.
Number one homes go up in value over time. This is why so many investors choose to invest in real estate. They also invest in other things like stocks and bonds. They invest a lot in real estate because historically home values go up in value over a long period of time.
In fact, 83% of a homeowner's equity or net worth at the time of retirement comes from real estate, comes from the equity that they have in real estate, whether that's their own home or other investments. That's huge. That means by the time people retire, 83% of their wealth is tied up in the real estate. That's where their wealth is coming from.
So real estate is a fantastic way to build wealth because you have a value going up when you're renting. If the value of your house goes up, you're most likely just going to get charged more for rent instead of gaining the equity of that appreciation.
Also, number two, you get to live where you want, and maybe not right now, but you get to move towards that in the future. What I like about real estate is it helps you get on a game plan to figure out what's the best thing that you want for you and your family financially with the real estate. And I look at this through a stepping stone approach.
So let's say right now with real estate, you can't move exactly where you want. Maybe it's not the ideal city. Maybe you can't afford it, or maybe it's not a desirable neighborhood that you can afford right now. But you can use a stepping stone approach to get there in the future.
So for instance, let's say the max you can afford right now is a hundred thousand dollar house, but your desired location or school district is maybe 400,000.
With the stepping stone approach, what you can do is get a hundred thousand dollar house, and then while you're in that home for a couple of years, you're gaining an appreciation of your property and you're paying down the loan. And this spread is the equity that, having this property that you can take and then sell your home and buy a slightly bigger home.
So maybe you went from a hundred thousand dollar house to a $200,000 house. And then from a $200,000 house, you're gaining appreciation and paying down the loan, you're getting more equity. And then you might buy that $400,000 house.
With renting, you can't do that. You can't take any money that you paid into rent and move into a nicer rental or into a property. But with real estate, you can, you're gaining equity and appreciation to take that money. And now leverage it in the future. As it continues to grow through a stepping stone approach.
Also number three, this is one of the big ones that people talk to me about. I can't tell you the number of stories I've heard of renters who are so tired of their landlord, not doing anything, or the restrictions that they have in their apartment.
So when you purchase, you have the full freedom to change, move and rearrange everything from the carpet to the paint color, to the tree in the front yard, you get to decide what you want to do. And really that control helps you have helps people feel better emotionally because they get to control where they live and what it looks like and how it feels when they come home to the place where they spend a lot of their time.
Your monthly payment helps you build equity, not just to rent. This is where a lot of people talk about when you're renting, you're paying the landlord's mortgage because part of your monthly payment, when you're purchasing goes towards the equity of your house. This is what we talked about when you're paying down your loan and you're getting the appreciation that spread is the equity that you get.
So when you're renting, let's say you rent for a thousand dollars a month. You will never see any of that thousand dollars a month ever again, when you're purchasing, let's say on a 30-year loan out of that thousand dollars, there's going to be a couple of hundred dollars. It's going to your principal over time.
You're going to get more principal paid in there instead of interest. If you did something like a 15-year loan, then you're going to be paying a lot more principal in there. But when you're purchasing, you get to have some of the equity buildups instead of just. Number five. This is big for a lot of people.
A lot of rentals have a ton of restrictions on animals you can have. It's always funny to read some of the rules and it's you can have a goldfish, just one, not two. So it comes down to that flexibility and that freedom of homeownership of you get to set the rules on what you want. And for a lot of people having pets is a non-negotiable and owning lets you do that.
A lot of people don't consider is secured equity lines. You could have this in a form of what's called a Home Equity Line of Credit or HELOC for short, or you could do a cash out refinance.
But basically, what happens when you own a home and you build up equity again, you have an appreciation and you're paying down your loan. You have equity in your property. You can actually use that equity and borrow against it to pay off credit cards. You could do home improvement. You can get out of debt by using your home equity.
And it's a really great way to access a line of credit without needing to pull out a higher interest credit card or an unsecured loan. This credit is secured against your property, which is a lot safer than having something like a credit card.
You have a lot more control over where you can live when you are purchasing. When you're renting, you're really subject to whoever is choosing to rent in that area. And especially for a lot more desirable neighborhoods. There aren't a lot of rentals. If you look around your local city, if you find some of the higher prices, the neighborhoods that a lot of people are trying to get in. Mainly they have maybe nicer school districts.
There usually aren't a ton of rentals available in those areas. Unless you're in a really dense metropolitan area. Mainly just because a lot of people aren't putting homes up for rent because people like to purchase in those days.
Number eight is you get the stability of your payment. When you're renting, you're subject to rent, increasing just at the will of the landlord. If they want to charge more, they can charge more. And there's really nothing you can do. When you're purchasing your payment is going to be locked. If you get a fixed loan, some people choose to get an adjustable-rate mortgage so I would suggest you do a lot of research. If you do go that route because they can be a little bit risky.
But for most people, they're going to choose a fixed. And that means your payment's going to be locked for the entire duration of your loan. So there might be 30 years for you or 15 or 20, depending on what you choose. But the only thing that will change at that point, is our taxes if your taxes go up or down, which unfortunately they tend to go up and your homeowner's insurance, which you get to shop for and decide what that payment looks like.
Number nine is we have historically low rates right now. 10-20 years ago, interest rates were double if not triple what they are currently. So we're in a rate environment where really anything sub 5% is an incredibly low historical rate. So a lot of people are still fighting to get down to the twos and the low threes that we saw before the housing.
And those still exist every once in a while, depending on the type of loan and type of circumstances that you're in. But even if rates hit 5% and higher, we're still seeing historical lows where borrowing debt for a low cost relative to what it used to cost to borrow money. And this is a really great time. If you're looking to get into real estate, whether it's a primary residence or an investment lock in some of those lower interest rates to protect yourself against any future change in interest rates.
So those are some nine top reasons why should buy a house again, never feel pressured into moving quicker than you need to make a plan. Set it up. Execute it. You don't have to feel pressured to move to a timeline that someone else is trying to get you to move with because you're just going to make mistakes. It's going to be sloppy and you're not going to enjoy the process while you're doing it.
So my best advice is to set up a plan, get some advice, execute it, and you will be happy and ready to go when the time comes.