Homeownership is and has always been seen as a crucial component of the American Dream. While preparing for a down payment and committing to a mortgage may seem daunting, the numerous advantages that come with owning a home last a lifetime.
If you are on the fence about purchasing your first house, take a look at this list of the top four perks of investing in a home of your own.
1. Build Wealth
Homeownership increases your wealth. First of all, you build equity in your home as you make your mortgage payments. Home equity is the portion of the property’s value that you own. It increases in value when the market value of your home rises (or when you make extra payments on your mortgage). When you pay your mortgage off you will own your home outright. That implies you’ll wind up with a valuable asset worth hundreds of thousands of dollars. Renters, on the other hand, never own anything because their monthly payments are paid directly to the landlord.
You can also use the equity in your home to borrow cash for house improvements, school expenses, or even an emergency fund.
The second reason homeownership creates wealth is that properties frequently increase in value. If you purchase a home for $350,000 and it appreciates to $400,000, your wealth grows without you having to do anything. While this isn’t always the case, many people enjoy significant increases in their home prices over time.
2. Tax Benefits
One of the major benefits of homeownership is tax breaks! The most notable deduction is that homeowners can deduct their monthly interest payments from their tax returns. Because your monthly payment is almost entirely interest throughout the first few years of your loan term, this is a tremendous benefit. The other common type of tax deductions is property taxes, private mortgage insurance, and even improvements to your energy efficiency.
You can also write off any mortgage points within the first year of ownership, which might save you a lot of money depending on how many points you claim.
Furthermore, if you decide to refinance your property after accumulating enough equity you have the option of taking out a tax-deductible home equity line of credit.
If you want to learn more about how buying a home will affect your taxes, you can consult your tax expert.
3. Build A Strong Credit History
An important factor that impacts your credit score is the length of your credit history. As mortgages typically last for 15 to 30 years, making on-time monthly payments is an excellent way to establish a solid payment history and demonstrate your creditworthiness. As your credit improves, you may be able to refinance for a reduced interest rate, allowing you to save even more money on your property. Good credit history will also help you get further loans in the future, like purchasing a car, home renovations, or even upgrading to a bigger house.
4. Create Your Dream Home
As a homeowner, you have complete freedom to make changes inside and out to create the environment you want -from gardening to flooring to removing walls. When you rent a home, however, the rental agreement usually restricts the tenant’s ability to make aesthetic alterations, such as changing the color of the walls or the cabinetry.
In addition, home upgrades can increase your home equity and the value of your property. So, every dollar you gain in value (thanks to your efforts) will be money in your pocket when you refinance or sell!
If you have decided that buying a home is the best option for you, please feel free to contact one of our experts to discuss your home loan alternatives. We are here to assist you.