Money

Here's why Warren Buffett thinks you should buy a home

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When it comes to homeownership, there are people who think it's "an escalator to wealth" and others who claim it's "the American nightmare."

What does self-made billionaire Warren Buffett say? His advice is to buy.

Real estate is a valuable asset "for a great many people," particularly for families that plan on being in the same location for many years, he tells CNBC: "If you know you're going to live in a given area, or think it's very likely, for a considerable period of time and you've got a family, the home is terrific."

Warren Buffett
David A. Grogan | CNBC

One of the reasons a home is a terrific buy is because of the 30-year mortgage.

The investor took out a 30-year mortgage in 1971 when he bought his Laguna Beach, California, vacation home, which he recently listed for $11 million: "When I bought it for $150,000, I borrowed some money from Great Western Savings and Loans. So I probably only had $30,000 of equity in it or something like that. It's the only mortgage I've had for 50 years."

A 30-year mortgage is "the best instrument in the world," Buffett says. "Because if you're wrong and rates go to 2 percent, which I don't think they will, you pay it off. It's a one-way renegotiation. It is an incredibly attractive instrument for the homeowner and you've got a one-way bet."

While his six-bedroom, seven-bathroom seaside place is for sale, don't expect his house in Omaha, Nebraska, which he bought in 1958 for $31,500, to go on the market anytime soon. "I wouldn't trade it for anything," says Buffett.

Don't miss: Warren Buffett once bought Bill Gates lunch at McDonald's with coupons

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