Some of the biggest fortunes on the planet start with a single real estate investment which snowballs into billions. There are a lot of benefits of owning a home but it's important to keep aware of the financial benefits as much as the emotional and psychological. These benefits could end up yielding great wealth over time.
Here are the top four to keep in mind.
1. Homeownership Builds Wealth
One of the major benefits of owning a home is that it's not only a valuable asset, but it grows over time. It's more than a financially savvy move for some families. It's often the beginning of generations of wealth and ownership of assets.
In the ups and downs of the last few decades of the housing market, a lot of people trying to get their footing suffered losses. However, those who were able to hold on to their home were able to bounce back faster and stronger than others.
We've entered a new market, but homeownership is still foundational. People who buy homes that they can actually afford will build more wealth than those who don't. While it might take longer and some will feel more reluctant to take the leap, those who do will build generations of wealth to pass along.
On top of that, this home is like a forced savings plan. Even if you don't have a family, the money you pay for your home is money literally in the bank to be used later. If often grows faster than any other type of account.
2. More Equity Every Month
When renting an apartment or a home, you count your monthly living costs as a loss. While you can find ways to write them off on your taxes, your rent checks don't leave you owning much of anything at all. Some people might think that they're in the same boat when paying off their mortgage but that's not the case at all.
Every single mortgage payment is another portion of ownership of a home. Equity increases in ways that aren't possible when paying for rent.
The reduction of your mortgage leads to eventually greater wealth. In fact, it brings other financial benefits to it. When you pay off your mortgage, you can take out loans against that amount or refinance your home, giving you other opportunities to grow your wealth.
As the principal goes down year after year, by the time you reach your last payment, you'll have powerful equity that you can bank on. Your credit score will climb through the roof and your credit opportunities will multiply.
3. Save On Your Taxes
Depending on where you live, property taxes could be one of the banes of your existence. As they go up, you could start looking around to make sure you're really getting your money's worth. Those tax dollars that should be going to your local schools, to fixing potholes, or taking care of public works might even politicize you.
Get informed on the tax code to ensure that you can get the most out of the home that you buy. While you'll be expected to pay taxes, there are some fantastic reductions. Mortgage interest can be deducted from the taxes that you owe.
Interest payments are one of the largest parts of many mortgage payments, often doubling the price of the mortgage over the course of a 30 year period.
In the year that you buy your home, you might also be eligible for some closing costs deductions. These are the costs that come out of pocket when you finalize the sale of your home. From the loan origination fee to the costs fo running inspections, you might be able to write all of these things off.
If you combine that with the deduction you get from property taxes paid, it could save you a lot to buy rather than to rent. Owning a home could mean that you get to hold on to more of the money you earn.
4. Other Financial Benefits
If you build up equity over time, you get to deduct taxes from the credit lines that you take out on that home equity. Not only is this a great way to give your self the option for a line of credit when you need an upgrade or repair, but this can be cheaper than an actual loan. The interest paid on your home equity loan could cover your credit card or other types of high-interest debt.
If you'd prefer to get some of your money back through filing your taxes, a capital gains exclusion is a good direction to go. All you have to do is to live in your home for more than two years.
This is a massive amount of money for anyone who got rich in the housing lottery. While you can predict to some degree where a home value will increase, these kinds of leaps and bounds are rare. However, theydo
still happen and when you're on the receiving end, you can make a lot of money on your investment.
The Benefits of Owning a Home are Easy to See
For anyone unaware of the benefits of owning a home, it could be surprising just how massive they are. Over time, a family can build up their wealth and security just for purchasing a house.
Follow our homebuying checklist to ensure you end up with a deal.