For decades, becoming a homeowner has been synonymous with the American Dream. While making the decision to buy a home is a big one, there are plenty of reasons why you should consider doing so when the time is right. Our latest blog post is going to cover just some of the many reasons homeownership is the way to go.
A report from the US Census Bureau reveals that one of the biggest contributors to wealth is homeownership. In fact, wealth inequality between homeowners and renters is quite significant, with homeowners’ median net worth being 80 times larger than renters’ median net worth. That’s because when you own a home and pay a mortgage, you’re building equity. You build equity in two ways: by paying down your mortgage loan over time and through your home’s appreciation.
Each time you make a mortgage payment, it slowly builds equity. In addition, real estate values tend to rise over time. This means that as you pay down your mortgage and your home value increases, you’re creating long-term wealth. Compared to paying rent where your landlord pockets the money and you see no return, owning your own home makes much more sense.
While there are plenty of mortgage programs available, the most popular continues to be a 30-year fixed-rate mortgage. Unlike rent, a fixed-rate mortgage doesn’t go up year after year. This means that your housing costs may decline over time. On the other hand, the average rent increase per year is approximately 3% to 5% and is up to the discretion of your landlord upon renewal of the lease. This means that if you’re looking for the peace of mind that comes with steady monthly housing payment, homeownership is likely your best option.
3. Tax Breaks
Many don’t realize that, as a homeowner, there are tax benefits for buying, owning, remodeling, and even selling your property. These benefits come in the way of tax deductions, which lower your taxable income therefore reducing your tax liability. A mortgage interest deduction means that the interest you pay on your mortgage can be deducted from your income and can equal big savings each year. You may also be able to deduct a portion of your property taxes. With federal tax returns, the law allows you to deduct up to $10,000, or $5,000 if married and filing separately, of your state and local taxes. Finally, when it comes time to sell your home, you may not have to pay taxes on any profit that you make. This depends on how long you owned and lived in the house before selling it as well as how much profit you made. For instance, if you lived in your home for two out of five years before the sale, up to $250,000 of profit is tax-free. If you’re married and file your taxes jointly, then the amount of tax-free profit goes up to $500,000.
Owning a home of your own means that you can paint your walls fuchsia, remove that hideous shag carpeting, and so much more. As a renter, it can be tough to make even the simplest of changes as it’s often spelled out in your rental agreement that you cannot alter the property in any way. As a homeowner, not only can you make changes that range from hanging pictures to remodeling your kitchen, but certain changes also increase your property value.
Something else to consider as a renter is the lack of privacy afforded to you. It’s common practice for landlords to add provisions to your lease that that entitle them to make unannounced inspections. This can be both stressful and frustrating for you as a tenant. While most states provide certain rights to renters, you still must be aware of anything in your rental agreement that restricts those rights.
5. Put Down Roots
In addition to financial benefits, research suggests that homeownership reaps long-term social benefits as well. A study conducted by the National Association of REALTORS(R) reveals better educational achievement and a higher rate of civic participation. Also, homeowners are usually happier and healthier than non-owners. There are also lower crime rates among homeowners, in part because stable neighborhoods spot perpetrators more easily. Being a part of a community where you’re involved in local government and the general well-being of those in it goes a long way to improving quality of life. When you buy a home, you’re making an investment in the areas school system, recreation areas, and policies that not only affect you but your neighbors.
Choosing to own a home is a big commitment. Being informed about what if means to be a homeowner and the benefits that come with the territory may motivate you to finally join the ranks of millions of Americans. If you’d like guidance on what options are available to you or even what steps you can make today to ensure mortgage approval when the time comes, contact a Silverton Mortgage professional and let them help you discover what the road to homeownership looks like for you.