Eric Belsky, the Managing Director of the Joint Center of Housing Studies at Harvard University, recently published a paper titled “The Dream Lives On: The Future of Homeownership in America.” In it, he shares five financial reasons why owning a home is a smart move. Let’s break it down:

Homeownership is a leveraged investment.

“Most people don’t borrow money to buy stocks and bonds, and lenders aren’t keen on lending for that purpose. But with a house, you can amplify any increase in its value through leverage. Even with a 20% down payment, you get a leverage factor of five, so a 1% rise in home value means a 5% return on equity. With smaller down payments, the leverage can be even higher.”

You’re paying for housing whether you own or rent.

“When you own a home, your mortgage payments reduce your principal. Renters, however, are paying down their landlord’s principal.”

Owning is like “forced savings”.

“Saving money can be hard, but owning a home ensures you’re putting money into an asset every month. It’s a great way to build equity and save, since you have to make a housing payment anyway.”

There are significant tax benefits to owning.

“Homeowners can deduct mortgage interest and property taxes from their income. Plus, if you sell your home at a gain, up to $250,000 (or $500,000 for married couples) of that profit is excluded from your income.”

Owning is a hedge against inflation.

“Over time, housing costs and rents typically increase at or above the rate of inflation, making homeownership a solid way to protect yourself from rising costs.”

Bottom Line:

Owning a home isn’t just a good idea for social and family reasons; it makes solid financial sense too.