Have you ever asked yourself what are you paying for when you buy a house? Often times when people bicker about renting or buying a home the key issues is that home values increase over time. Obviously, that assumes that your home is an investment.
This article is the third part of a four part series for home buyers. I’ll be doing on some topics related to home ownership. Here’s what is upcoming over the next few weeks:
- Pay Off the Mortgage Sooner or Invest: A Look At The Math
- First Home Buyer Info | How To Know If You’re Ready to Buy
- How To Pay Off the Mortgage Early
However, I think there are substantial differences between what defines a home and what defines an investment.
A home is a place of safety, security, and comfort. It is a place where smiles abound and a memories are made. Home, is where the heart doth dwell.
An investment is a place where money is given the opportunity to appreciate. It is a place where risk is involved and profits are both made and lost. An investments, is where the dollar doth dwell.
Thus I think it is hard to own both a home and in investment.
When The Home Is Just A Home
I love my house. It is now about three years old but it already has the scratches on the wall by the fridge where my son decide he was going to draw on the wall with daddy’s keys. It has the overgrown garden where we attempted to grow a garden ($50 worth of seeds and products and only 3 cucumbers). It has the warped door from where we had the leak.
That is our home and we love it.
It provides a place for us to lay our heads. Provides the shelter we need. It keeps us safe.
Our home is a home.
Can A House Be A Home and An Investment?
When home prices started dropping a few years ago people started acting like a basket of moneys. Everyone was shocked, they were concerned, they were threatened. Now, let me offer a big fat disclaimer, I was not living in North America when house prices started to drop and in fact our house value has continued to increase.
However, isn’t your home still your home no matter its value?
Does the insulation let in more cold when the house is worth $50,000 less than you paid for it? Does the carpet feel less soft now that the value has decreased? Do you kids have trouble sleeping because the housing market is in a slump?
So why do we worry?
Because we make the mistake to buy an investment instead of a home.
A home is a home regardless of what the market does.
When I paid for my home I was not buying potential. I was not buying for what could have been. I was buying a comfortable and safe place of residence. I am still getting that for every dollar I spend regardless of the house value (measured externally). In fact, my house value (measured internally) has increased. We’ve grown attached to our home. It is more special to us now. The home is more of a home.
Dangers When You Try To Buy An Investment Not A House
When you want to invest you are more likely to move to a neighborhood that doesn’t personally suit you as well, just because it presents a great possibility for a return.
When you want to invest you are more likely to borrow extra money (because you’ll get more return) and as a result you might jeopardize the peace you enjoy within the home.
When you want to invest in a home you are more likely to be concerned about market drops and increases. When the market is hot you might think about moving the family just to take advantage of the market.
If you house value increases – great. That is icing on the cake. If it decreases – what does it matter? You got the home at the time you needed a home.
Is your house choice influenced by investing? How much of the house decision should be an investing choice and how much of it should be a personal comfort choice?