Advantages of Home Ownership

Home ownership has long been touted as the American dream, and almost 7 of every 10 families live in a home they own. With proper planning and discipline homeownership can be achieved and do wonders for your quality of life.

Buying a home has many distinct advantages over renting. Here are a few of the things you can do as a homeowner:

1. Take that tax deduction. This is probably the sweetest part of homeownership. The mortgage interest and real estate property taxes you pay on your home are tax deductible. If you consider that during the early years of your mortgage the overwhelming majority of the payment is interest this deduction can have a huge impact on the amount of tax you pay or conversely, in the amount of money you save. For instance, if your mortgage payment is $1,000 per month then you will pay $12,000 in total payments over the course of a year. Since the majority of your house payment is interest in the first years, you will have easily paid $10,000 in interest during that year. If you are in the 28% tax bracket then you will receive an extra $2,800 tax refund just because you own a home. You could have easily paid $12,000 in rent during that same period and would have no tax advantage whatsoever. Additionally some of the closing costs you paid when you purchased your home may be deductible as well. When you consider that you can often finance a home for the same amount you pay in rent per month you really come out ahead with ownership.
2. Build equity in your home. By purchasing a home you are actually taking part in an investment that can appreciate similar to stocks or bonds. With care a home will usually increase in value each year and, at the same time you will be paying down the balance owed with each payment. In time, this equity buildup can help you trade to a nicer house or finance major purchases such as a college education or a new car. Since you would be borrowing money from the equity in your home the interest is usually tax deductible which saves you money as outlined above.
3. Take control of your destiny. By taking the steps to purchase a home you are moving in the direction of financial security. When you purchase a home with a fixed-rate mortgage your payments will remain the same except for minor adjustments due to rising costs of insurance or property taxes. As a renter you are subject to the annual rental increase which is generally 4-6%. That is, if you are currently paying $1,000 for rent it will likely increase to $1040 next year and up every year thereafter. These annual increases translate into rental rates that generally double every 12-18 years. Additionally, as long as you make your monthly mortgage payment you will never be forced to move. Many landlords will force you to move just so they can raise the rent.
4. Customize your home. If you need to modify a room, add on a room, or would like to try some funky wallpaper, it’s your call. No need to worry about how to get around the landlord’s rules. Many home improvements add value and help build equity.

Before you go very far in your quest for a new home, you’ll want to start off with a firm knowledge of what it takes to qualify for a mortgage, and how much home you will be qualified to purchase.