Homeowners tend to see their property as passive investments that will hopefully pay off at some point in the future. The housing market collapse has corrected much of that thought process, but there are still those who figure that buying in when prices are low will work out well decades from now.
Girls Just Wanna Have Funds brings up some points to counteract that line of thought:
* Paying your mortgage is not “forced savings.” If your home value is level, you can rationalize that paying down your principal is a way of generating a sort of savings account. But this line of thinking doesn’t make much sense because you can’t withdraw the money. Taking out a loan to access your equity will hit you with heavy interest.
* Renting isn’t necessarily throwing your money away. Although homeowners take comfort in the fact that their mortgage interest is tax deductible, some forget that they can only deduct the interest if they itemize their returns. Also, if they move frequently — always looking for a bigger, better place — they’ll lose far more money than renters in closing costs and interest.
* Houses are money pits. Repairs, property taxes, homeowners insurance and improvements all sap money from you, and all are costs that renters never have to pay. Even if your house appreciates in value, you can’t get a measurement of how much your so-called investment is making for you unless you deduct all the hidden fees. And you only reap the profit if you sell and don’t buy another house.
6 Reasons Why Your Home Is A Crappy Investment [Girls Just Wanna Have Funds]