Homeownership.
It’s the American dream, the symbol of stability, security, and prosperity. It’s one of the staples of living a financially-secure life, and one of the pillars that supports the American economy.
While people may disagree on the ways to buy a home or the level of importance to overall financial health, virtually everyone agrees that owning property is a good thing.
In a world where no one can seem to agree, why is homeownership so universally-accepted as a positive? Because, quite frankly, it brings so many financial and lifestyle benefits, benefits which can be both short and longterm.
Why Buy a Home? Here are the Top Reasons…
Interest Deductions on Taxes
From a financial perspective, one of the largest benefits of homeownership is the ability to deduct a portion of the interest you paid towards your loan out of your taxes. This is a federal tax benefit that has been around for a long time, and, while modified, continues with the tax reform that was passed at the end of 2017.
For new mortgages, only interest on the first $750,000 worth or mortgage debt is deductible. In areas where housing prices are relatively low, this will not make a difference, as anything below $750,000 will have deductible interest. However, for higher-cost areas, such as San Diego or San Francisco, only the interest paid on the first $750,000 will be deductible. Despite the changes, deducting interest from your taxes remains an important financial benefit for homeownership.
You can use an interest-rate-deduction calculator to see how much you could save through home ownership.
Equity Increase
As you steadily make payments towards your mortgage loan, you will progressively gain ownership in the home, which is usually called “equity” in the real estate industry. Whether you sell your home after five years, ten years, or thirty years, whatever equity you gained can be used for your next home, saved for retirement, or used to buy a new car; the choice is yours.
How much will you gain in equity? Bank of America provides a good explanation on how to calculate your future equity.
Home Will (Almost Certainly) Gain in Value
As time goes by, the value of your home will steadily increase. At least that’s the assessment made by housing professionals, realtors, and mortgage experts. It’s also the conclusion you’d come to if you look at past home values. Home values have a steady and prolonged history of increases, making property one of the most trustworthy investments possible.
While nothing will guarantee a gain in value (and homes, in some areas, have gone down over short periods), homes have a well-established history of financial gains. According to information from Investopia, home prices rose from $20,100 in 1968 to $185,200 in 2004. According to the National Association of Realtors, the median home value as of March 2018 was over $240,000. Clearly, when you purchase property, you are all but guaranteed a strong investment.
Acts as a Saving Plan
Owning a home also forces you into a savings plan, as every dollar you pay towards the balance (not the interest) is essentially money saved. When you make a rent payment, your cash goes to the landlord; it’s gone forever. However, when you make a payment towards your mortgage, a percentage goes towards added interest while most of it (in total, at least) goes towards paying off the loan.
Essentially, with every payment you make, a portion goes to owning the home. In a way, this is like saving the money you spend on housing.
Fixed-Rate Mortgage Payments Stay the Same
If you rent a place to live for ten years, you are assured that your monthly payments will gradually increase. Landlords, after all, have to compensate for increases in home values as well as the cost of living and general inflation. For this reason, you should expect gradual increases in your monthly cost.
If you get a fixed-rate mortgage, however, your costs is locked in, so you won’t have to worry about an increase in the cost of your monthly mortgage payment. While adjustable-rate mortgages can increase, most have a cap, limiting the amount you’ll have to pay in any given month. This is not a luxury you have while renting.
Freedom with the Property
Want to have a pet? Want to install a backyard patio? Want to build a sports bar in basement? You probably can’t if you rent. After all, most landlords don’t allow pets, and even if you got permission for renovations, you wouldn’t want to invest money to remodel someone else’s property.
When you own your own home, however, you can do as you please. It’s your house, so you can have as many pets as you want (within reason, we hope!) or conduct any remodeling projects you prefer.
The House is Yours to Sell (Not a Landlord’s)
Another downside to renting is that you don’t control the ownership or status of the home. While rare, it’s not impossible for a landlord to sell or to decide to occupy the house themselves.
You may have a rental agreement that gives you some control, but in most cases your living situation is controlled by another person.
Rates are Going Up
To be fair, this point has more to do with why you should buy a home now, and less to do with buying a home in general. As the economy improves, interest rates are steadily rising, meaning the sooner you buy, the less you’ll have to pay in interest. Rates can certainly go down, but all indicators suggest that interests rates will only go up over the next few years.
Affordable Homeownership Can Be Your Dream Come True!
Want to learn more about the advantages of owning a home? Contact San Diego Purchase Loans and we’ll help you understand the benefits and potential downsides to home ownership.
With experience, training, and a dedication to common-sense underwriting, we can help you get approved for a mortgage that helps you achieve the American dream of affordable homeownership!
