The Top Benefits of Home Ownership
There are obvious reasons for home ownership. There are a number of secondary benefits of owning a home verses renting also.
First, of course, is that you have somewhere to live where you make the decisions.
Buying a House Is Generally A Fantastic Investment
The U.S. Census Bureau has a table of historical home values on its website that starts in 1940 and ends in 2000. It uses constant year-2000 dollars for all figures to account for inflation.
The Bureau indicates that housing prices increased the fastest (43 percent) during the 1970s and slowest (8.2 percent) in the 1980s.
Home Ownership Gets Easier Over Time
Each month you are building equity as you pay your mortgage over time. This is an asset you can sell or borrow against in the future. There can be a financial strain when buying a house the first time. You have the down payment along with all the other costs and then the unexpected home ownership costs. You may feel the costs for a few years, but it gradually things get easier.
Another thing is mortgage payments won’t increase with a fixed mortgage. As you progress in your career, those payments become more affordable. If you are renting, it doesn’t matter if you get a raise or not, your rent is eventually going to go up whether you can afford it or not.
Tax Breaks Right Now
Check with your account first about your individual situation but generally mortgage interest and certain closing costs are tax deductible. You get most of the tax deductible relief during the early years when you are paying the bulk of your mortgage interest. Mortgage insurance and property taxes may also be deductible, again, check with your accountant.
Build to Your Tastes, Not Your Landlord’s
Does decor matter? Do you want your walls painted in crazy shades of red and orange? Do you want a dozen pets? Do you want to spend your weekends tearing apart engines or building furniture in your shop? When it is your own place, there is no landlord to tell you, you can’t.
Improve Your Credit Score
If you don’t have a long credit history or many installment accounts, buying a house can improve your credit score. Provided you pay your mortgage on time and consistently, this helps drive up your credit score in three ways, by showing what a responsible borrower you are.
- Consistent payments show you’re a responsible borrower
- Credit bureaus often give more weight to a mortgage payment history than to revolving accounts like credit cards.
- Few landlords report rental payments, so your mortgage gives you an extra account on your credit report.
Wealth Accumulation via Forced Savings
You can view the equity you build in your home as you make payments every month as a type of saving. Unlike renters, you’ve no choice but to increase your net worth. The Harvard University Joint Center for Housing Studies confirms this. In fact, on of their studies showed that homeowners acquire 46 times as much net wealth as renters.
For every $1,000 accumulated by non-homeowners, those who own a home acquire $46,000.
Almost 60% of the wealth of homeowners is in the form of home equity.
Of course, renters are free to save too. However, for most folks who do not have portfolios of stocks, mutual funds and other investments, home-ownership is the most reliable way to accumulate wealth.
Benefits for Your Family
The National Association of Realtors (NAR) website links to studies and reports that make some pretty extraordinary claims for the benefits of home-ownership, including:
a. Better mental and physical health
b. Improved community engagement
c. Higher educational attainments for the children of homeowners
d. Pride of ownership
Of course, you do have to involve yourself in your neighborhood, support your children’s efforts, and take pride in your investment. Only you can decide on the validity of the benefits for your family.
Taken from Tom Bonetto, Mortgage Loan Originator, November 28, 2016
and Peter Warden (The Mortgage Reports)