It may sound like I’m totally against home ownership, but that’s not true. Not every financial decision has to be based on what is best financially. Owning a home has plenty of intangible benefits. One big one is pride of ownership, the freedom to customize with renovations and putting down roots for your family are just a few.
Buying a house or renting?
Those are all valid reasons to own a home. Homes are generally a great purchase so don’t just don’t tell yourself that your home is an investment. Math, specifically the opportunity cost of your down payment, says to invest in a rental property. Not your personal residence every time.
Some personal finance gurus like Dave Ramsey advise you to buy your home and pay it off as fast as you can. Ramsey wants you to get a 15-year mortgage, live below your means, pay off all your debt.
BY paying down your mortgage might preserve wealth, but it will not create wealth. It appeals to a need for security and the satisfaction of being debt free.
People say homeownership is an excellent path to build wealth. I venture to say however that renting a property is an excellent path to build wealth.
Ramsey has valid points though. If you have extra money each month and are trying to decide between paying off your mortgage and buying a new expensive car, please pay your mortgage.
But if the decision is between paying off your mortgage and investing your money in the stock market or a new investment property, I would disagree with Ramsey and tell you to invest first.