Buying a home may be a significant investment up front, but it represents the opportunity to build wealth and create long-term savings.
If buying a home is on your list of goals, there are several benefits you should know about.
Four significant benefits of homeownership
You have payment stability when you own a home
With a fixed-rate mortgage, your monthly mortgage payment won’t change, ever, unless you refinance.
As rental prices go up every year, your mortgage payment will remain the same. Providing you with stability year after year.
As your income increases each year, your monthly housing expense will remain the same.
The predictable housing cost makes it easier to plan and save for retirement or have more money to spend on other investments.
Your property can build equity
You accrue equity on your home with every mortgage payment you make.
A portion of your mortgage payment goes towards the loan’s interest, and the remainder is used towards the principal, which means you are paying down the loan every month.
This is known as equity. As the home prices go up, your equity will go up.
You can eventually leverage the equity by borrowing against it for home improvements or investments.
You gain equity in your home by paying about the same amount that would have gone to rent.
Or, if you feel like it’s time to sell, you can use that equity to put a down payment on a larger home.
Check out these different down payment options.
You’re free to change decor and landscaping
As a homeowner, you have the freedom to do what you want with your space. Want some pink walls with red cabinets? You can do this. It’s your home. You can do what you want without anyone’s approval.
You have tax advantages for owning a home
As a homeowner, you can receive tax deductions every year.
Most homeowners can deduct the mortgage interest payments and the property tax payments from their federal taxable income.
If you own a home and have a mortgage of less than $750,000, you can deduct the interest you pay on the home loan. This is one of the most significant benefits to owning a home versus renting-as you could get massive deductions at tax time.
When you own a home, you can also deduct your property taxes. This is a deduction of up to $10,000.
If your property taxes are added to your monthly mortgage payment and paid through an escrow account, you will see the amount you paid in taxes on your IRS Form 1098. You can apply that deduction directly to your taxes.
Note: Talk to a tax professional regarding these deductions before making the decision to move forward with buying a home. The tax codes change from time to time. To get the most up to date info – talk to your tax professional. Here is a more in depth article about the tax deduction by Taxpolicycenter.org
Homeownership can be an excellent financial investment depending on your specific goals and situation.
Understanding the benefits of owning a home can help you make a more educated decision. In fact, you may not have known about some of these or known the degree to which they can benefit you.
More info that may interest you:
- What’s the First Step in Buying a House
- How to Buy a Home for the First Time: A Guide
- Earnest Money – What is Earnest Money and is it Required?
- How to save for a down payment