One of life’s greatest accomplishments is purchasing your own house. Even though it can intermittently seem challenging, owning your house has many advantages. The benefits of homeownership typically outweigh the drawbacks if you are financially prepared. Here are some advantages that come with being a homeowner.
1. Build Equity
According to NAR, undoubtedly the most apparent advantage of homeownership is its positive financial impact. If individuals’ homes sold for the average price, homebuyers who purchased ten years ago would have made an average equity gain of $225,000. As a homeowner, you will accumulate equity by making loan principal payments and by increasing the value of your home (also known as appreciation). Your home equity gives you options when you need to access money and helps to keep your finances stable. When you sell your home, the net proceeds may be utilized as a down payment for your next home. You can use equity to fund home improvements.
Your situation is in the landlord’s hands when you rent, and they might make a decision they no longer want to let you use their place. Aside from being emotionally challenging, moving is also expensive and inconvenient. Freddie Mac mentions, while monthly rent payments may rise over time, a fixed-rate mortgage will guarantee that you’re paying the same amount each month. Your interest rate is fixed with a fixed-rate mortgage for the duration of the loan. Your ability to effectively budget and plan for the future is enhanced by consistent payments.
3. Tax Deductions
The mortgage interest deduction is a significant tax advantage of homeownership. Here are a few typical expenses that you can write off when you own a home, according to Freddie Mac.
- Mortgage Interest- This enables homeowners to deduct the interest costs on their mortgage up to $750,000* from their taxable income. Both single taxpayers and married couples filing jointly are subject to this cap. Mortgage insurance premiums are usually charged if you put less than 20% down or obtain a loan from the Federal Housing Administration (FHA). You might be able to write off the cost of your mortgage insurance depending on your income.
- Property Tax- You usually pay personal property taxes to your state, county, and other local governments throughout the course of the year as a homeowner. Up to a certain amount, the IRS permits you to deduct such personal property taxes from your federal income tax return. The tax code specifically states that you can write off a total of $10,000 in local and state taxes. Therefore, if you also intend to claim your state’s sales tax or income tax deduction, those will also count toward the $10,000 cap.
4. Build the House You Want
Owning a home gives you complete creative freedom; you can decide to completely renovate the house. The capacity to build a space for you and your family to call your own is invaluable. Every money that your home has appreciated in value is yours to keep if you sell because home improvements can raise a property’s value.
5. Hedge Against Inflation
Rent is similarly impacted by the state of the market and inflationary pressures. For instance, if the owner makes improvements or if your neighborhood suddenly becomes more attractive, the cost of living in your rental unit could increase as well. However, if you already own a home, you can keep it for many years at the original purchase price thanks to a long-term fixed-rate mortgage.
The Bottom Line
Homeownership is an excellent investment for many reasons. Not only does it provide a sense of stability and security, but it can also result in long-term financial benefits, such as tax breaks and equity appreciation. Homeowners also enjoy the freedom to customize their homes and make them their own. With the right planning and preparation with your local expert, homeownership can be an incredibly rewarding experience.
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