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Owning a home pays off

By Lynne Schreiber / Special to The Detroit News

It's long been said that buying a home is a good investment. But why?

According to realestateabc.com, a Web site that offers tips for home-buyers, "homes appreciate about 4 or 5 percent each year."

While figures vary between neighborhoods, regions and years, generally the value of the property rises, making it a steadily increasing, relatively low-risk investment.

But 4 or 5 percent doesn't sound like a huge return on investment, right?

Think again, says Terry Light of realestateabc.com.

Let's say a person puts down $40,000 for a $200,000 home and takes out a mortgage for the rest of it.

In that first year, at an annual appreciation rate of 5 percent, the home will gain $10,000 in worth -- that means the owners earned $10,000 on a $40,000 investment -- a 25 percent return on investment. Not bad.

Don't forget, though, that homeowners make monthly mortgage payments and pay property taxes along with other necessary costs. Yet mortgage interest and property taxes are tax-deductible -- so "the government is essentially subsidizing your home purchase," the Web site notes.

"Your rate of return when buying a home is higher than most any other investment you could make."