A house is where you live–not an investment
Very good point – as long as you fall into that category of living there until you die. True for some people but far from all. Also, even for those people, it is not a complete view of the financial situation.
A reverse mortgage will allow you to sell the house and get paid for the rest of the time you live there. So you can build up equity over 20,30,40 years and then take a reverse mortgage and get payments every month (based on your investing in your house). Reverse mortgages, like many financial tools, can be applied poorly and is I would guess unethical behavior related to them is fairly high (so be very careful!). If you think of such an option you need to do your research and actually understand what you are doing – you can’t afford to be like the many ignorant mortgagors. The AARP offers information on Reverse Mortgages.
Additionally, you lock in a large part of your housing cost (you still have maintenance and taxes but you do not have every increasing rent. Now ever increasing rent is not a certainty but for many it is very likely rent will go up on average over the long term. Ownership of your home removes the risk of being priced out of the area you want to live by increasing rental prices over time. You also lose the potential of benefiting if rent prices fall over time, but I would say the more valuable of those options is avoiding the risk of rising rental prices.
Related: How Not to Convert Equity – Housing Inventory Glut – articles on home ownership and real estate
Comments
3 Comments so far
“you should be paying 1/3 of your gross income, so if you make $5,000 per month before taxes, your rent should not be more than $1,666…”
Carnival of Personal Finance #137 – The Passion Edition…
Nothing great in the world has ever been accomplished without passion — Hebbel
That image at the start of this post is a Passion Flower. My passion is investing, primarily dividend investing. However, the thing about blogging and reading …
The ‘default saving’ feature is one of the large benefits of home ownership. That benefit is destroyed when you take out loans against the rising value of the house…