Why do you want to buy a home? Perhaps your reasons are vague: “Because that's what people do” or “Because it seems like it's about time I did.” Or maybe you know exactly why you want to take the step from renter to owner.

Let's look at some of the advantages of homeownership. These points will help you decide if it makes sense for you.

A home is certainly a good financial investment, and most likely, the home you buy will appreciate, in some regions more rapidly than others. Even an annual rise that keeps pace with inflation is a savings for you.

The investment pays off when you move. If you can command even a little more money from the property you are selling than the amount you paid for it, you can use your equity in that home to buy a more expensive home than you were able to afford the first time. Gradually over the years, with buying and selling, you can build quite a nice investment for yourself. For many, that sizable amount of equity will contribute in a major way to a financially comfortable retirement.

Of course, many people buy a home intending to stay in it for a very long time. You are looking for a place to live for many years, and it may be too early to think about when you might want to sell it. But even if you are not planning to sell your home in the foreseeable future, the appreciation of your home still makes your purchase a worthwhile investment.

One of the greatest benefits of housing as an investment in this country is not completely understood by most of the people who use it. Real-estate professionals, however, understand it very well. It is called leverage. Leverage means investing as little as possible of your own money to make as large a purchase as possible. In other words, you gain leverage when you use borrowed money (the mortgage loan) as a means to purchase your home investment. As a result, a small percentage of appreciation in home value can mean a large return on the cash you actually put into the purchase.

For example, let's say you are, because of a good income and credit history, allowed by a mortgage lender to make a $10,000 (10 percent) down payment on a $100,000 home. Your home appreciates at the rate of 5 percent the first year. At the end of that year, the house is worth $105,000. At the end of year two, it is worth $110,250, and so on. After three years, you are ready to move up to a larger house. Because you have taken good care of your property and kept up the interior, it sells for $119,000. When you have covered expenses related to selling, you net $110,000. After paying off the mortgage, which still has a balance of nearly $89,000, you have slightly more than $21,000 cash in hand. Your $10,000 investment has more than doubled in three years, all thanks to leverage. And those numbers are conservative; some leveraged investments in homes bring their owners 200 percent or more in as little as three years.

Interest paid on a mortgage is deductible from your gross income on federal tax returns. So are real-estate taxes. The two together usually comprise the majority of the monthly payment made to the mortgage holder in the early years of homeownership. Thus, for the homeowner, housing becomes, in effect, a deductible expense. Tenants who pay rent have no such benefits.

Owning your own home can be a great way to save money. As you pay off your mortgage each month, you are gradually reducing the principal (amount of your loan), while your equity, or the amount of the home you actually own, grows. Your home is likely appreciating while you own it, but the amount of your mortgage remains the same. This works like a giant piggy bank — the money you accumulate in the home continues to increase, acting as a sort of high-interest savings account.

A fixed-rate, long-term mortgage is a popular form of home financing. (Other mortgage options are discussed in Chapter 4.) The amount of the interest you pay on the loan is fixed, which means you are assured of the same, constant base payment for your housing for the next twenty or thirty years. Inflation, or an increase in housing demand and its resulting rise in housing costs, will not change the payment. Even an adjustable-rate mortgage is likely to have a cap on possible increases in your monthly payments.

Can you say the same about rent? Of course not. Rents usually go up and up and up, especially when you look at a long-term leasig picture that covers the next twenty or thirty years.

You are likely to get more space for your money in your own home than in an apartment. Indeed, if your family is large, owning a home may be your only viable housing option. But it is more than a matter of bedrooms. With many homes, you also get storage space in the form of an attic, a basement, or a garage — sometimes all three.

To many people, a home means owning a bit of the good earth. Land buys distance from your neighbor — something that is hard to come by in apartment living. Land also brings the opportunity for gardening and growing your own vegetables. And usually, there is room for the kids to play.

Condos and co-ops do not usually include ownership of your own piece of land outside your unit. You may have only a patio or a small area for gardening. However, you also don't have to mow the lawn!

Security means a variety of different things. To some homeowners, it means personal safety — being in a neighborhood with low crime rates, a good neighborhood watch program, and good lighting on the streets. Perhaps living on a street with little traffic is important, an area where neighborhood kids can play safely in and around their homes. To others, the safe neighborhood represents security for their hard-earned investment dollars. They are certain that having chosen a home in a stable neighborhood, perhaps protected by strict zoning laws, their home will increase in value.

Many homebuyers feel pride of ownership once they have purchased a home. A home becomes a status symbol, proof of your success and coming up in the world. Homeowners see their homes as extensions of themselves and are pleased that their hard work has resulted in their being able to have their own place.