At some point in your life, you may hope to own a home. You might consider it simply another investment, or more of a personal benchmark, a sign of what you’ve accomplished.
A home can be a smart investment because it provides you with an essential need — shelter — while also having the potential to increase in value. When you own, you make monthly payments toward your mortgage, building
equity
in your home. One advantage of home equity is that you may be able to borrow against it at favorable
interest rates.
There may also be tax advantages to buying a home, which may be one reason your tax adviser urges you to purchase rather than rent. You can deduct the interest on your
mortgage
— the long-term loan you take to pay for your home — and a number of the costs of arranging the mortgage. You can deduct local real estate taxes on your federal return. And up to $250,000 in
capital gains
on the sale of your primary home are tax exempt, provided you’ve lived there 2 of the preceding 5 years.
Buying a home doesn’t necessarily mean buying a single-family house. You might want to look into condos and co-ops, which can be more affordable and more convenient for people living alone. You might also consider a multi-family dwelling, so that the rental income on the other apartments could help pay the mortgage. The drawback in that case is that you become a landlord.
