Whether you have been thinking of purchasing a home for some time now, or maybe haven’t really ever considered the matter; here are some financial advantages to owning your own home.
- Tax Advantages
- Inflation Shield
- Cost Reductions
- Social Responsibility
- Financial Responsibility
There are many ADVANTAGES to owning a home. Homeowners have a lot more privacy, good bye noisy upstairs neighbors. Homeowner's costs are also more consistent and predictable. Owning a home can be wealth builder over the long term, but some investors leverage their money on short-term flips. The interest you pay on your monthly mortgage is a tax deduction, but as a single person renting you miss out on that tax break. If you live in the home for more than two years, capital gains taxes no longer apply (always consult a tax specialist).
When a person buys a home on a fixed-rate mortgage, this person has an inflation shield. Homeowner's on a fixed-rate mortgage know their mortgage isn’t going to go up. Not now, not in the next year or five years from now, as the cost of living rises they are sheilded. When you rent the cost of rent generally goes up at the end of your lease. When a person attempts to go renew their lease, they may find they have been priced out of their target payment comfort zone. They may end up paying even more though, because they may not have factored in any of the additional costs associated with moving. Things such as securing a new home to rent, putting up hefty deposits, first and last month , utility transfers, and the like. Moving can be expensive, even when it is a do it yourself job to reduce costs. In many cases, owning a home can be cheaper than the cost of renting a home and not moving every year or two equals Cost Reductions.
Next lets talk about the appreciation factor. Once you buy a home, it doesn’t stay the same price you bought it for. Rather, it usually appreciates over time. Warren Buffett is quoted saying “Price is what you pay. Value is what you get.” Value is what you need to know; tomorrow’s values are variably much higher, but there is more to it than merely appreciation factors. Homes appreciate in value and that value is called equity. Equity is the difference between what you owe on the mortgage of your home and its appraised value. You may be able to leverage this money to help you later. For example if decide to sell your home to buy a bigger home or make repairs or upgrades to your current home you can use that money as a down payment or as a Home Equity Line of Credit. Building wealth is all about leveraging your investments to the best of your ability.
Owning a home is a big responsibility, a big social and financial responsibility. It can also make owners more financially responsible and socially aware of your impact. Lets say you own a home and as such, you are now invested in your investment and want to make sure it’s protected. You are more likely to want to vote, give back to your community or are involved in your community, and take pride over the home’s appearance. This social responsibility also gives way to a greater psychological well-being. Research done by habitat for humanity (www.hfhmn.org) shows in their 2015 Homeownership Impact Study, homeowners are happier have a high satisfaction with life and better self-esteem, because they have to worry less when they can provide a safe environment for their family; they have a more positive mindset, because they are in control and have a good handle on things.
Social responsibility helps lead to financial responsibility. These things mean you are aware of your expenses, cost of living, and live below that threshold to make ends meet. You have a budget, you stick to it day in and day out, ensuring things are properly cared for. Homeownership can bring you to a civic sense of social responsibility, which can help lead the path to financial responsibility as well.
With any large purchase, there are questions to ask and answer, especially for purchases of this magnitude. Contact me with any questions!