Does it still pay to own a home?

You bet!
Benefits include equity build-up, tax benefits, and borrowing power.

During the 1980s, conventional wisdom held that buying a home, waiting a year or so and then selling it was the best "get rich quick" strategy to take advantage of skyrocketing home prices. At the very least, real estate has always been a good, safe investment. But with a sluggish economy, some potential home buyers are asking if it still pays to own a home.

Owning a home, along with steady employment, and obtaining an education, is a component of the "American Dream." These goals are what most people consider necessary for long-term financial security. Of these, home ownership probably is the most difficult to achieve.

But today's low mortgage rates combined with the exceptional values in the Rhode Island real estate market have made home ownership more affordable now than at virtually any point during the 1980s. Most economists believe that the economic advantages of home ownership remain hard to beat.

Real estate is still a respectable shelter for savings. Add the rent you would pay if you didn't own - plus the generous tax breaks still allowed under federal and some state laws for mortgage interest payments and property taxes-and the family home looks pretty good.

The monetary value of home ownership is measured by both the equity built over the years and the tax benefits. These are tangible benefits realized from the time you buy until the time you close on a sale. In addition, prospective homeowners should consider the less tangible benefits such as privacy and establishing roots in the community.

Prospective homeowners should view paying off a mortgage as a forced savings plan. Your equity then gives you extra borrowing power - important to consider if you're planning to send children to college. In addition, you'll most likely already own that home when retirement rolls around, which will greatly lower your housing costs. If you trade down to a smaller home, you may walk away with a sizable return on your original investment besides.

As a homeowner gradually pays off his or her mortgage, they builds up equity - money available when it's time to sell. In addition to equity build-up, owning a home results in more savings than renting does, as much as 30 percent.

When renting, the monthly payment doesn't build resources for the future. Actually, a renter is helping to buy the property for the landlord.

And what about those who predict an unstable housing market? The best way to hedge the uncertainty of future housing costs is to pay them in advance - become a homeowner now. Unlike most rental fees, mortgage payments do not rise with the cost of living. Thus, as inflation continues and your salary increases, mortgage dollars become cheaper and easier to pay.

Remodeling or improving an apartment benefits you only while you're a tenant, and often a landlord will take money out of the security deposit for any changes in the property. Many rental inhabitants "make do" with where they live instead of spending money and effort to make the changes they would enjoy.

On the other hand, remodeling or fixing up your own home can increase your satisfaction of your living environment while increasing its overall value. Enhancement of property value is a strong incentive homeowners possess that renters do not.

Home ownership also provides important social benefits to a community as well as economic benefits. Homeowners vote and volunteer their time for political and charitable causes with more frequency than do renters.

The stake home ownership gives them in their community provides an incentive to be much more aware of proposals to change zoning or to build roads. Don't forget that homeowners pay real estate taxes, which are a major resource for local coffers. Owning a home gives people a reason to care-and that makes all the difference.

Reprinted with permission of NATIONAL ASSOCIATION OF REALTORS®