When it comes to buying a home, there are numerous perks that you should consider—financial stability, financial strength, and tax deductions, to name a few. Also, owning a house means you have a permanent home and, most importantly, a sense of belonging in your community. These are key components of why owning a home is the American dream.
While the fluctuating real estate market makes the purchase of a home seem more daunting to many homebuyers, there are still many benefits of homeownership to consider.
9 MOST COMMON BENEFITS OF HOMEOWNERSHIP
While the purchase of a home is a personal one, with many considerations such as the current housing market, interest rates, your financial position, and credit score–and more–to consider, there are some benefits of homeownership that are (nearly) universal. Here are some of the most common perks to keep in mind when weighing whether to buy a home.
1. BUILDING HOME EQUITY
One of the most obvious benefits of homeownership falls into the financial realm. Buying a home is a big investment up front, but over time, you will start to build equity in the home. Rather than paying rent and “throwing your money down the drain,” you are putting that money toward your mortgage, investing what you pay into the home.
Paying your mortgage each month builds equity. This also means that you are setting aside money for your future, whether it’s for your retirement or something to pass down to your children.
2. STABILITY IN MONTHLY MORTGAGE PAYMENT
Another financial benefit of homeownership is that you never have to fear your mortgage rising in price (unless you have a variable-rate mortgage). With most rentals, the landlord or rental company usually raises prices every year. Rental rates typically rise in excess of inflation, outpacing wage gains by as much as 4X.
However, if you have a fixed-rate mortgage, then once you agree to the purchase price and lock in the interest rate of your loan, your monthly mortgage payment will stay the same for the life of your loan. This makes it easier to plan a monthly budget and typically offers protection against financial fluctuations.
3. IMPROVES COMMUNITY RELATIONSHIPS
Aside from the financial factors, there are several social benefits of homeownership and stable housing to consider. Not only does homeownership benefit the financial aspects of your life, but it can also benefit your social life. Homeowners are more likely to contribute to the maintenance of their properties and the surrounding areas, building long-lasting relationships with their neighbors and other people in the community.
4. IMPROVES MENTAL & PHYSICAL HEALTH
Owning a home can improve your mental and physical well-being. A study by the National Association of Realtors recently found that homeowners have a higher level of self-rated health compared to non-homeowners. The study also showed that homeowners have higher self-esteem and happiness compared to non-homeowners.
5. ABILITY TO MAKE PROPERTY IMPROVEMENTS
Another benefit of homeownership is property improvements. Owning a home offers you the freedom to be creative (or keep it simple). You can renovate anything in the home that you don’t like (so long as you consider codes and regulations), making your home reflect who you are and helping you feel a greater sense of belonging.
6. TAX BENEFITS
According to the Tax Policy Center, the tax benefits of homeownership in the United States date back to the start of income tax in 1913. There are multiple tax benefits available with homeownership, but these benefits vary based on multiple factors. Take some time to do your research on the different tax benefits before you buy.
One of these is mortgage interest deduction, which means that any interest paid on a home mortgage is tax-deductible. In other words, you can reduce your taxable income by deducting the interest paid on a mortgage.
Another great benefit is a property tax deduction. This tax benefit depends on your jurisdiction; you can find out more about this on Investopedia or by speaking with a tax advisor.
You can also make a profit from selling your home if you need to move or want to upgrade your house to something newer. You can also be exempt from up to $250,000 after selling a property because of an exemption in the capital gains tax.
7. REDUCED CRIME RATE
Research on crime and homeownership shows that lower crime rates among homeowners and people living in a stable housing environment are consistent with theories on social disorganizations. A stable neighborhood, independent of ownership structure, is also likely to reduce crime. Having a good community structure tends to keep the crime rates low to none at all.
8. PRIDE OF OWNERSHIP
One of the many great things about being a homeowner is the feeling of accomplishment that comes along with owning a home. Having somewhere safe where you can hang up your hat at the end of the day and a place for your kids to sleep at night can give you a sense of pride and stability. Having a place where you can make memories, celebrate holidays, and spend time with family and friends is an important milestone in many people’s lives.
9. ENCOURAGES SAVINGS
Paying a mortgage every month and reducing the amount of your principal is like a forced savings plan. Each month you are building up more valuable equity in your home. Someday you will have a piece of property that you can sell for profit, rent out, or reap the benefits of living without a monthly mortgage or rent payment in.
So, is homeownership actually worth it? The answer varies greatly from person to person, location, and financial situation. However, according to the Federal Reserve’s 2020 Survey of Consumer Finances, homeowners have on average a net worth that is 40 times greater than their renter counterparts, which reinforces the idea that owning a home is a smart financial move. If you’re unsure whether buying a home is the right move for you (literally and figuratively), sit down with a financial planner to look over your specific options.