The Overlooked Financial Advantages of Homeownership
Brent Wells February 17, 2020
Brent Wells February 17, 2020
There are many clear financial benefits to owning a home: increasing equity, building net worth, growing appreciation, and more. If you’re a renter, it’s never too early to make a plan for how homeownership can propel you toward a stronger future. Here’s a dive into three often-overlooked financial benefits of homeownership and how preparing for them now can steer you in the direction of greater stability, savings, and predictability.
According to an article by the National Association of Realtors (NAR):
“If you’ve been a lifelong renter, this may sound like a foreign concept, but believe it or not, one day you won’t have a monthly housing payment. Unlike renting, you will eventually pay off your mortgage and your monthly payments will be funding other (possibly more fun) things.”
As a homeowner, someday you can eliminate the monthly payment you make on your house. That’s a huge win and a big factor in how homeownership can drive stability and savings in your life. As soon as you buy a home, your monthly housing costs will begin to work for you as forced savings, coming in the form of equity. As you build equity and grow your net worth, you can continue to reinvest those savings into your future, maybe even by buying that next dream home. The possibilities are truly endless.
One thing people who have never owned a home don’t always think about are the tax advantages of homeownership. The same piece states:
“Both the interest and property tax portion of your mortgage is a tax deduction. As long as the balance of your mortgage is less than the total price of your home, the interest is 100% deductible on your tax return.”
Whether you’re living in your first home or your fifth, it’s a massive financial advantage to leverage tax relief on the interest you pay each year. Under current tax laws, itemizing allows you to deduct mortgage interest on the first $750,000 of your home loan principal. It’s a powerful incentive that you simply do not get when renting. Be sure to work with a certified tax professional to ensure you maximize the standard or itemized benefits on your annual return.
A third item noted in the article is how monthly costs become more predictable with homeownership:
“As a homeowner, your monthly costs are most likely based on a fixed-rate mortgage, which allows you to budget your finances over a long period of time, unlike the unpredictability of renting.”
With a mortgage, you can keep your core monthly housing costs steady and predictable. While rent prices across most major U.S. markets have seen a compounding climb over the last decade, securing a fixed-rate mortgage ensures your principal and interest payment stays locked for the life of your loan. If you want to insulate your budget from unexpected annual rent spikes, taking control of your housing timeline through purchasing is your best strategy.
If you’re ready to start feeling the benefits of stability, savings, and predictability that come with owning a home, let’s get together to determine if buying a home sooner rather than later is right for you.
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