When The Time Is Right To Buy A Home
- 2004 12 May
I've always regretted some bad advice I gave one of my employees. Shortly after Tom came to work for me I encouraged him to buy a house that he had to stretch to afford. At that point in my life I bought into the traditional logic that says, even though it may be tough, it still makes sense to buy a house as early as possible.
But, like I said, this house was too expensive for Tom and his wife. It strained them financially, and even worse, it put pressure on them emotionally. It added stress to their marriage and sapped their personal peace. Fortunately, Tom had good enough sense to forget my advice and sell the house-which the Lord helped him do. They moved into a more affordable rental home that was perfect for their needs. It gave them the financial breather they needed to regroup, pay off some debt, and begin saving to buy another home. Eventually, with their financial house in order, Tom and his wife bought a lovely home that fit their needs and financial abilities.
Back then I was just like most of the rest of the culture: I saw nothing wrong with encouraging people to borrow when they wanted stuff they couldn't afford. I have changed a lot since those days.
Today I spend my time traveling to churches and colleges nationwide teaching God's people how to use God's money God's way. When I present the No Debt No Sweat! Christian Money Management Seminar I urge people to avoid too much debt. I teach people how to pay off debt and develop spending plans that bring harmony back into family life. I show folks how to find great bargains and enjoy life without having to spend a lot of money.
But I believe there are times when borrowing can make sense. At the top of that list are homes. I love home ownership. In a recent article I wrote for Crosswalk (Home Ownership: To Buy or Not To Buy? That Is the Question.) I listed six times when renting may make the best sense. I'm sure some of you thought I was going out of my way to be a domestic killjoy. In an attempt to bring some balance, lets look at the flip side of the coin and talk about when the time may be right to buy a home.
There are some right motives-and times-to buy a home. Without question, home ownership is a cornerstone of the American dream. Today, there are over 70 million homeowners in America, and most are happy with their decision. Each year there are about 5 million homes purchased and of those buyers, over 40% are doing it for the first time! So, if this is your first time into the home buying market-relax. It can be a lot of fun. Following are some of the reasons that could make homeownership a good consideration for you:
1) "Oh, Toto, there's no place like home." With that one short statement, Dorothy summed it all up. There really is nothing like getting up in the morning and putting your feet down on your own floor. Most families long for a place to call their own. While homeownership can become a source of inappropriate pride, there is a healthy sense of security that comes with owning a home. Of course many happy, successful families never own a home. But most people will agree that homeownership enhances a child's sense of permanence and well-being. It has a stabilizing effect on most families.
2) Appreciation of value. For many people, their greatest financial asset is their home. Historically, homeownership has been one of the most dependable and conservative ways available for the average Joe or Jane to build their net worth.
Home ownership allows you to build equity in two ways: First, since you are no longer making payments to a landlord, the mortgage payments you make on your home serve as a type of savings plan. As you pay the price of the house down, you build equity (or, an ownership interest). Conversely, a renter's monthly payment goes to the landlord and doesn't allow the opportunity to build equity. Second, over time most (but certainly not all) homeowners see the original value of their homes increase. We have all known of people (maybe our own parents) who bought a home decades earlier for $30,000 or $50,000 only to sell it at retirement for many times their original investment.
3) More privacy and greater lifestyle flexibility. Just a few weeks ago Matt, one of our youth ministers, and his wife Elizabeth, bought their first home. About a week after closing, I asked Elizabeth how they were enjoying their new house. "Wow, I can't believe how quiet it is," she said. Then she went on to tell me how it was the first time in their married lives when they didn't have to put up with other apartment renters' stereos.
When you own your own home you set the rules. If you want it quiet at 10:00, just turn off the lights and shut the door. If you want a garden, plant one. If you don't want to listen to the CD player at 2:00 in the morning, don't turn it on. It's great!
4) Price stability. Unlike renters, who usually have to contend with annual lease increases, most homeowners enjoy greater price stability. Most fixed rate mortgage loans are structured so that the principal and interest portion of the monthly payments stay about the same for the full term of the repayment period. Historically, this has been a great advantage because, due to the effects of inflation, you repay the mortgage with "cheaper" dollars.
5) Tax advantages. Although I don't usually advise investment decisions be driven solely by tax considerations, tax benefits can be a great way to ice the cake. I believe this is especially true with home ownership. In most cases, the interest paid on your home loan is tax deductible. Additionally, there may be other tax benefits available to homeowners that renters don't get. Of course, as is the case with anything else, consult a competent advisor before making any investment or tax related decision.
Steve Diggs presents the No Debt No Sweat! Christian Money Management Seminar at churches and other venues nationwide. Visit Steve on the Web at www.stevediggs.com or call 615-834-3063. The author of several books, today Steve serves as a minister for the Antioch Church of Christ in Nashville. For 25 years he was President of the Franklin Group, Inc. Steve and Bonnie have four children whom they have home schooled. The family lives in Brentwood, Tennessee.
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