Homeownership is the pillar of the American dream. While there are situations when renting is the best option, those who purchase a home often see major financial benefits. Obtaining the keys to a home certainly requires a certain amount of financial success to cover down payments and closing costs, but the benefits will continue to outweigh that initial investment.
- Build equity with every monthly payment. With every payment you make, you own a little bit more of your home. You increase your equity as the value of your home increases, and as you pay off more of your loan. You can gain equity even faster by paying extra each month or by making home improvements that increase your home’s value.
- Build your net worth over time. This only works if you buy a house you can afford for the long-term. Asset wealth provides stronger financial stability for your future than your income. Home values generally increase from 3-4% per year. This means your net worth increases in value over time, simply by paying your mortgage payment every month. You do not get this benefit from renting.
- Think of it as a form of savings. Because you are increasing your equity every month and the value of your home is most likely growing over time, it’s like a forced savings plan in a sense.
- Enjoy mortgage tax benefits. Your mortgage interest, some closing costs, and property taxes are all tax-deductible.
- In the long-term, it’s cheaper than renting. In the first year or so, renting may be cheaper due to down payments and closing costs. But over the years, your mortgage payments will likely be less than renting something comparable.
There are risks in homeownership that everyone should consider. If you are thinking about taking the plunge, be sure that you’ve calculated the cost of maintenance for both minor repairs and for the major home systems that have a high price tag. There are factors that can cause depreciation, such as when your home becomes worn out and updates haven’t been made, or the neighborhood itself depreciates.
A good real estate agent can help you navigate the decision to move from renting into homeownership. They will be your greatest ally to help you get into the right home at the right time for you.
If homeownership is in your future, we’d love to talk to you today and discuss your real estate goals. You can reach us at 480-816-5557.