The cost of living is on the rise, and it seems like everything we need to buy is becoming more and more expensive. While it’s true that the cost of purchasing a home has gone up as well, there are still plenty of reasons why buying a home is a wise investment – even during periods of high inflation. Here are seven reasons you should still buy a home even with high inflation:
1. It’s still more cost-effective to buy a home than to rent one.
Even with inflation, homeownership is still cheaper than renting in most markets. When you own a home, your monthly mortgage payment stays the same for the life of the loan. But when you rent, your landlord can raise the rent yearly as inflation increases.
2. Home values rise with time
While the value of your home may go down in the short term due to market conditions, it will almost always go up in a long time. In fact, over the past 50 years, the average annual return on investment for housing has been about 6%. That’s higher than stock market returns and savings account interest rates.
3. While incomes generally increase, your mortgage payment stays the same.
As mentioned earlier, your monthly mortgage payment stays the same for the life of the loan. But incomes typically rise over time as workers get promotions and receive cost-of-living adjustments (COLAs). This means that your mortgage payment will become a smaller percentage of your income over time, making it easier to afford.
4. There are a variety of programs accessible to assist first-time buyers.
If you’re a first-time homebuyer, you may worry that you won’t be able to afford a home with high inflation. But many programs can help you buy a home, even if you don’t have much money for a down payment or perfect credit. For example, government-backed loans like FHA loans only require 3% down payments and allow for lower credit scores. There are also down payment assistance programs available in many states that can help you make a down payment if needed.
5. Forced Savings Plan
One of the biggest reasons to purchase a home is that it forces you to save money. When you’re paying off a mortgage, a portion of each payment goes towards your principal balance, which reduces the amount you owe on your home. This equity can be tapped into later if you need it, but it also serves as a forced savings plan for those who might not otherwise be saving for retirement or other long-term goals.
6. Provides Certain Tax Benefits
Mortgage interest and property taxes are tax deductible, which means they decrease your taxable income and could result in a lower tax bill come April 15. These deductions are usually highest in the early years of homeownership when you have more interest and less principal paid each month.
7. You don’t have to wait for inflation to go down before buying a home
Many people wait to buy a home until they think inflation has peaked and prices have stopped rising. But by then, they may have already missed out on an opportunity to buy a home at an affordable price. In most cases, it’s better to buy sooner rather than later, even if inflation is high.
Don’t forget that even with high inflation, there are plenty of reasons to buy a home. Homeownership can provide many financial benefits, from forced savings to lower taxes. So if you’re considering purchasing a home, don’t let high inflation scare you away. Work with an experienced real estate agent to find the perfect home for you and your budget.