We’ve all heard it before, and I have even said it before: buying a home is part of the American dream. It can initially be more expensive to own a home than rent (depending on circumstances), but there are multiple benefits of buying a home that you can’t get from renting. Read on to learn the various ways that homeownership can help you create a secure financial future and build wealth over time.
Over the past year, our homes have become an integral part of our lives more than ever. They’re much more than somewhere to sleep, they are our workplaces, virtual schools, and safe havens through the evolving health crisis.
DID YOU KNOW? Today, 65.8% of Americans are fortunate enough to call their homes their own.
There can be risks and barriers associated with buying a home such as the threat of depreciation, being tied down to one place, and saving enough money for a down payment. However, a significant thing to remember is that home ownership has both financial and social benefits, such as:
1. BUYING A HOME IS A GOOD INVESTMENT
Buying a home is one of the best long-term investments you can make. Rental costs are creeping up. And, while home prices are also increasing, when you stay long enough, the value of your property will traditionally go up as well. When you are ready to move, you’re likely to get a substantial return on your investment. Because interest rates are currently low, now is a good time to consider taking the plunge. You can contact me if you are ready to buy and I will help you navigate this market.
2. PAYING A LOW MORTGAGE RATE
As I said above, mortgage rates are at an all-time low right now. This one is actually an advantage of buying a home right now and does not necessarily apply to all time periods. Currently, we are experiencing some of the lowest mortgage rates historically offered. To put this into perspective, the average 30 year fixed rate mortgage interest rate in 1984 was 13.88%, whereas in 2014 it had dropped to 4.17% and now reaching as low as 2.4%. This means there is a dramatic difference in the amount the average homeowner is paying in interest each month. While the price of homes may be going up, the low mortgage rates still make it a fantastic time to start your homeownership journey.
3. SAVE MONEY ON TAXES
Have you heard of mortgage interest? In the early years of your mortgage, interest is often a large part of your mortgage payment each month. Deducting the amount of your mortgage interest payments from your taxes is the chief tax benefit of owning a home. And, if you itemize your deductions, you can also deduct property tax payments and other expenses from your federal income tax.
This is handy considering it’s likely that the majority of your monthly payment is going to be interest for the first few years after you buy. When you sell your home, you will be able to avoid some of the taxes on the profit you make if you meet the ownership and residency requirements. You have to have owned the home for at least two years, or have lived in your home for two of the past five years you’ve owned it.
4. YOUR NEST EGG CONTINUES TO GROW/EQUITY
Equity is a word that gets thrown around often when talking about purchasing a home. Equity is the value of a property that you actually own. For example, if your home is valued at $250,000, and you owe $100,000 to the lender, you have $150,000 in equity.
Every time you make a mortgage payment, you’re one step closer to paying off your loan while building equity at the same time. What’s more, as your home increases in value, so does the amount of equity you have at your disposal. When necessary, you may be able to borrow against that value – to make home improvements or for unexpected medical or education expenses. This type of home equity line generally offers lower interest rates than a credit card and can be used to pay off high-interest credit card debts.
Owning a home brings a sense of happiness, satisfaction, and pride.
- Pride of Ownership: It feels good to have a place that’s truly your own, especially since you can customize it to your liking.
- Civic Participation: Homeownership creates stability, a sense of community, and increases civic engagement. It’s a way to add to the strength of your local area and drive value into your neighborhood.
- Privacy. One of the greatest benefits of owning your home is the privacy it can give you. Living in an apartment, you might have to deal with thin walls and noisy neighbors, this is much less likely when you own a house.
The benefits of homeownership go well beyond the basics and even more than the list above. Homeownership is truly a way to build financial freedom, be prideful in your domain, and make a substantial impact in your community. If owning a home is part of your goal/resolution for this year, message me so you can begin the homebuying process today.