Home, Sweet Home - 10 Benefits of Homeownership
Here are 10 perks of homeownership that you can’t get from renting.
For a long time, owning a home has been part of the American Dream. Is it right for you? While homeownership requires a substantial upfront investment, it has several long-term benefits. Let’s look at some advantages of owning a home.
When you’re ready, reach out to our mortgage experts and start your homeownership journey.
1. Your monthly payments are more stable
When you rent a house or an apartment, you don’t have any control over how much you pay. Your landlord can decide to raise your rent – sometimes by quite a bit. When you own a home, especially if you have a fixed-rate mortgage, you know what you’ll be paying every month. Stable payments make it easier to budget and can give you one less thing to worry about.
2. You can save more in the long run
While there are costs to buying and maintaining a home, having predictable monthly payments can end up being less expensive than dealing with regular rent increases every time you renew your lease. Rent hikes or paying high rent for a new house or apartment can really beat up your budget.
3. You can increase your net worth
Owning a home is a good investment, as its value generally goes up over time. Let’s say you buy a home today worth $200,000, and it increases in value by 3.9% annually. After five years, your home would be worth about $242,163. That’s a benefit you won’t get from renting, where you put money in but never get it back.
4. You can build equity
What’s equity? Simply put, it’s the value you have in an asset, the difference between the home’s worth and what you owe on the mortgage. You can build home equity in two ways:
- Make your monthly mortgage payments, which reduces the amount you owe.
- Your home may appreciate over time, increasing its value – sometimes substantially.
Once again, renters don’t get this benefit because you can’t build equity by paying rent.
5. Your home can be a source of cash
Another benefit of building home equity is the ability to tap into your home’s value for cash. You can do this in several ways:
- Home Equity Loan
This is essentially a second mortgage. You can generally borrow up to around 70% of the equity in your home.
- HELOC
This provides access to a line of credit. You can usually borrow approximately up to 70% of your home’s equity.
- Cash-Out Refinance
With this option, you take out a new mortgage for more than you currently owe, use that money to pay off the original loan and cover closing costs, and keep what’s left. You can typically borrow up to 80% equity.
6. You can get tax breaks
- Mortgage Interest
You may be able to deduct any mortgage interest you paid. Depending on where you live, you might also get a state mortgage interest deduction.
- Property Taxes
You may be able to deduct money you paid in property tax payments, as well as local and state income taxes and sales taxes.
Down the road, depending on how much profit you make when you sell your home, you might not have to pay capital gains taxes on the earnings. Be sure to consult a tax advisor to learn how buying a home can impact your taxes.
7. You can build credit
Your payment history makes up 35% of your credit score, so on-time monthly mortgage payments can help keep your score in good shape. Paying on time can also help you build credit, which can make it easier to get other types of financing.
8. You have the freedom to personalize your home
One of the biggest benefits of homeownership is making it your own. Unless you live in a community governed by a homeowner’s association, you can tear down walls, make additions, and decorate your home in almost any way you like. That’s something renters can’t do. Renovating your home may also increase its value, so it’s a win-win situation.
9. You can build a sense of community
Compared to renters, homeowners usually stay in the same place longer. This helps build neighborhood pride and stability, along with an increased sense of community. Maintaining a desirable neighborhood can also increase the value of your property – an added benefit.
10. You can increase your financial knowledge
There’s a lot involved in buying a house and handling mortgage payments and ongoing maintenance. Parents can use that knowledge to help their kids learn about finances. A solid financial education is one of the best things a person can have.
When you're ready to make a move:
As you can see, the advantages of owning a home over renting one are plentiful. Before you dive into homeownership, you’ll want to consider the current market, your finances, and your financial goals.
If you’re seriously considering buying a home, it’s a smart move to get pre-qualified. This will help you determine how much you can afford and what your monthly mortgage payments might look like.
If you have questions or want help planning for a home purchase, reach out to the mortgage experts at Western State Bank.
