5 Big Benefits of Homeownership
Thanks to benefits like security, freedom to personalize, sense of community, and investment opportunities, we know owning a home can be a rewarding achievement in life. But the ability to afford the American dream seems to fluctuate constantly. So why is homeownership still the dream, and is it an affordable dream for first-time homebuyers?
Financial stability
Probably one of the main benefits of buying a home is the stability — both in lifestyle and with payments. Monthly mortgage payments can actually be less than some rental prices. That’s because rent prices fluctuate and increase with yearly inflation. Rental rates in big cities, for example, increase on average around 6.1% a year — some upwards of 10%, while national rent average is about a 4% increase. Home prices on the other hand, with a fixed-rate mortgage, have a steady payment month after month, year over year.
It’s beneficial to know exactly how much you’ll be paying in the next five years so that you can plan your future accordingly.
And purchasing a home may be more affordable than you think. With the varieties of loan options available, you may not need to provide 20% down on your first home. In fact, loans like VA, USDA, and FHA have low-to-no down payment options. Even with some conventional loan options, you may only be required to put the minimum of 5% down, allowing you to finance private mortgage insurance into your monthly payments. Speaking of affordability, nearly 70% of current homeowners have a household income of less than $100,000. Which goes to show that it’s possible to own the American dream on a single salary, as well. Take a look at the reality of affording a home in the infographic below.
Financial strength
Owning a home can help build your financial portfolio, especially if you’re a first-time homebuyer. Investing in property is a good financial move, and homeownership can help your hard-earned dollars find their way back to you. In comparison to renting, your monthly home mortgage payments build equity (your share of your home’s value) over time, whereas paying rent to your landlord is an expense with no return. You may even have the option to build equity faster instead of watching it grow gradually overtime. Why build equity? Because it provides you with a financial cushion that you can use for other things in the future, like retirement, or as a downpayment on your next home. Next home? That’s right, you don’t have to live in your new home for the full 30 years, and yes, homeowners do move and upgrade from their starter homes after just 5 years. How can you build your equity faster?
Pay toward your principal, as long as there are no prepayment penalties
Consider refinancing to a 15-year loan, if it makes sense with rate conditions and your financial situation
If you’re refinancing, consider avoiding cash-out options as that can tap into your equity
If you’re planning on selling and buying a new home, then shoot for providing a larger down payment
If you haven’t purchased a home yet, consider putting down a little extra to own more of that home
Start home improvement projects, that increase your home value
Tax benefits
Speaking of returns, as a homeowner you may qualify for a sizable tax deduction — aka money back in your tax return. Did tax season just become more attractive? Potential tax deductions can range from claiming your actual home, home improvement expenses, insurance payments, and/or if you’re a first-time homebuyer. You may be surprised by all of the tax breaks for homeowners. Remember to talk to a tax professional for further questions about the tax benefits of owning a home.
Tip: Be sure to document all of your home expenses, and keep your settlement statement handy. You’ll need these when filing your taxes.
No more moving
We can all agree that moving is a hassle. Over time, moving from rental to rental becomes tiring, inconvenient and flat out expensive. Many renters can attest to this. Allow yourself to cash in on that stability that comes with owning your very own home by thinking about the things you want to have in a home long-term; like your 5-year, 10-year, and maybe 30-year plan. Download your free home wish list below, to start planning out some of those must-haves. Once you find your dream home, you’ll get one big move out of the way, and won’t need to plan one again for a long time, if at all. One of the perks of settling down in general.
Sense of community
Homeownership gives you the opportunity to truly plant roots in your local community. You can nurture lasting relationships with friends, neighbors, schools, teachers, and local businesses; providing you with a support system that just makes life in general easier and more enjoyable.