Suze Orman, a renowned personal finance guru, has long championed the benefits of homeownership. As market dynamics shift in response to contemporary economic trends, Orman’s insights offer valuable perspectives for those contemplating the significant decision of buying a house. This article dives into Orman’s perspective on why purchasing a home today can be a sound financial decision.
Homeownership as a Long-term Investment
Suze Orman has consistently espoused homeownership as a stable, long-term investment. While housing markets fluctuate in the short term, over the long haul, owning a home can be a reliable method for building wealth. This viewpoint remains relevant even in today’s dynamic market.
Orman recognizes that buying a house is not merely a transaction but a significant step in a person’s financial journey. She sees a home as more than a place to live—it is a long-term investment that can appreciate over time and provide substantial financial gains.
Building Equity
Orman frequently underscores the value of building equity, which homeownership uniquely allows. When you make mortgage payments, you gradually pay down the loan principal, effectively building your equity—something that doesn’t occur when you’re renting.
Over time, this accumulation of equity can become a significant financial resource. It can be leveraged later in life through tools like home equity loans or reverse mortgages. This built-up equity can serve as a form of financial security, a viewpoint that Suze Orman often emphasizes.
Tax Benefits
Another advantage of homeownership that Orman highlights are the tax benefits. Homeowners in the U.S. may be eligible for various tax deductions, including the mortgage interest deduction and property tax deduction. These benefits can lower your tax bill, creating another financial incentive for buying a home.
Despite tax law changes in recent years that have capped certain deductions, these benefits can still make a significant impact, particularly for homeowners in states with high property taxes.
Freedom and Stability
Beyond the financial benefits, Orman often discusses the emotional and psychological benefits of homeownership. Owning a home provides a sense of stability and security that is less certain in a rental situation. As a homeowner, you are not at the mercy of a landlord who may increase rent or sell the property.
Moreover, homeownership offers the freedom to customize your living space according to your preferences—an aspect of personal autonomy that Suze Orman appreciates.
Homeownership as a Forced Saving Strategy
Orman often describes a mortgage as a “forced saving strategy.” Each mortgage payment increases your home equity, contributing to your net worth. For individuals who struggle to save, this can be a practical way to accumulate wealth over time.
Buying a Home the Right Way
While Suze Orman is a proponent of homeownership, she stresses the importance of buying a home responsibly. She advises potential homeowners to secure a robust financial footing before purchasing. This includes having a healthy emergency fund, a steady income, good credit, and the ability to afford a 20% down payment to avoid Private Mortgage Insurance (PMI).
Orman also warns against buying more house than you can afford—a common pitfall for eager homeowners. She suggests that your housing cost (including mortgage, property taxes, and insurance) should not exceed 30% of your gross income.
According to Suze Orman, the benefits of buying a house extend beyond mere shelter. Homeownership can offer significant financial advantages, including building equity, tax benefits, and the forced saving aspect of a mortgage. It also provides psychological benefits like stability and freedom. However, the key lies in buying a home responsibly—ensuring it is a wise financial decision aligned with your long-term goals. As housing markets continue to evolve, Orman’s insights remain a guiding light for potential homeowners navigating the complexities of the buying process.