Homeownership is the epitome of the American dream, and your home is likely to be the most significant purchase you’ll ever make. If you purchase wisely, the equity growth of your home could lead to financial security.
That being said, there are responsibilities that come with owning your own home and it’s not simply a case of replacing your rental check with a mortgage payment. Below we uncover some of the advantages of being a homeowner as well as some other considerations you should be aware of.
Homeownership benefits
Equity
Equity is the value you personally own in your home versus that which a bank owns due to a mortgage. When you purchase a property and pay a mortgage, a portion of your monthly payment goes towards paying off the principal debt, and the rest goes to your lender as an interest payment. Each payment you make to the principal debt increases your ownership in your property.
Being a homeowner means you benefit from any improvements you make to enhance the appearance or livability of your property. In turn, this should also increase the value of your property in the long run.
If you decide to sell your property, you should walk away with increased equity due to the principal you have paid back – assuming a stable housing market and economy.
Compare that to what happens when you rent a property. Your rent goes to the owner. When you leave the property, you leave with just your personal belongings.
Tax benefits
Homeowners can benefit from significant tax advantages which potentially makes owning versus renting even more financially viable. These include deductions for real estate taxes paid each year, as well as interest paid on your mortgage each month.
Plus, there are exclusions for capital gains made on houses. You may be eligible for these as long as the home is your primary residence and you meet certain other requirements.
Stability
Homeownership can also provide a more stable and independent living environment. Renters tend to move as rates increase, which typically happens every year. Homeowners are more likely to stay put, and that means they are likely to:
Important considerations for future homeowners
Often first-time homeowners are unaware of the additional costs associated with purchasing a property, other than its purchase price. These “hidden” costs can amount to a healthy sum and can include:
Additionally, maintenance costs and unexpected repairs are something you need to consider. Many homeowners start separate savings accounts specifically to cover these costs as the need arises.
You want to consider all of the potential expenses when you’re trying to afford a house. Working with a professional real estate agent and discussing the costs can help ensure your savings adequately measure up to the financial commitment you’re making.
Owning vs. renting: Is buying a house worth it?
There are plenty of reasons why you might decide that renting is for you. When you rent, you take on less responsibility, you know your total housing costs every month, and you can more easily move when your lease is up. Plus, the process of buying a house can be a lengthy and arduous one.
However, homeownership is definitely worth looking into. Those who can afford to buy are usually able to enjoy special tax benefits and profit if the value of their homes rise while building strong connections in their community.
There is nothing quite like the feeling one gets from owning your own home. So if it makes financial sense and the timing is right for you, homeownership can be a highly rewarding decision.
