Buying a home is 38% cheaper than renting a home. This is especially true if you plan on living in one space for at least seven years. As mortgage loans are more affordable now with down payment assistance and different loan options, let’s take a look at the financial benefits of owning a home.
Financial Benefits of Owning a Home
One of the largest financial benefits of owning a home is building home equity. When you pay rent to your landlord, you’re setting aside a chunk of money that you’ll never see again. Additionally, landlords have the right to raise your monthly rent yearly, so what you pay today could differ than what you pay monthly next year. When you sign a mortgage loan, you are agreeing to the monthly payment for the life of the loan (likely 15/30 years). So, you can accurately budget your spending every month on your mortgage. When you pay your mortgage, you are building equity as you are paying off your loan. This means that unlike renting, you will see these funds applied directly toward what you own.
Another one of the biggest financial benefits of owning a home is the mortgage interest deduction. Most of your monthly mortgage payments will go towards interest in your first few years of homeownership. You are able to deduct that interest from your taxes, if your loan is $1 million or less. Additionally, any taxes you pay to the government on your property are deductible from federal income tax.
No longer moving every year
Homeownership increases sustainability and stability. While moving every year from rental to rental may be necessary for your lifestyle, it is a major inconvenience and a financial and emotional burden. Renting can mean you may never know where you are going to live in a year, or how much you’ll be paying. Owning a home allows a financial and emotional investment in both your physical home and your community.
Use your home investment toward another investment
The equity that comes from paying a mortgage is what allows many individuals make future investments in the same home (refinancing, renovations), a higher-valued home (using the equity toward a down payment), a second home (using equity toward a second down payment), or additional financial goals (paying off debt, buying an RV). A home equity line of credit helps homeowners use that part of their home that’s already paid off to obtain financing for additional investments.
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