Home, Sweet Home: 8 Benefits of Homeownership

For a long time, owning a home has been part of the American Dream. Is it right for you? While homeownership requires a substantial upfront investment, it has several long-term benefits. Let’s look at some advantages of owning a home.

1. More Stable Monthly Payments - When you rent, you don’t have any control over how much you pay. Your landlord can decide to raise your rent – sometimes by quite a bit. When you own a home, especially if you have a fixed-rate mortgage, you know what you’ll be paying every month. Stable payments make it easier to budget and can give you one less thing to worry about.
2. Increase Your Net Worth - Owning a home is a good investment, as its value generally goes up over time. Let’s say you buy a home today worth $200,000, and it increases in value by 3.9% annually. After five years, your home would be worth about $242,163.
3. Build Equity - What’s equity? Simply put, it’s the value you have in an asset, the difference between the home’s worth and what you owe on the mortgage. You can build home equity in two ways:
   • Make your monthly mortgage payments, which reduces the amount you owe.
   • Your home may appreciate over time, increasing its value – sometimes substantially.
4. Use Your Home Equity - Another benefit of building home equity is the ability to tap into your home’s value for cash. You can do this in several ways:
   • Home Equity Loan
     This is essentially a second mortgage. You can generally borrow up to 80% of the equity in your home.
   • Home Equity Line of Credit (HELOC)
     This provides access to a line of credit. You can usually borrow up to 80% of your home’s equity.
   • Cash-Out Refinance
     With this option, you take out a new mortgage for more than you currently owe, use that money to pay off the original loan and cover closing costs, and keep what’s left. You can typically borrow up to 80% equity.
5. Potential Tax Breaks - Unlike renters, homeowners enjoy several tax benefits. If you itemize deductions on your federal tax return, you can claim the following:
   • Mortgage Interest
     You can deduct any mortgage interest you paid. Depending on where you live, you might also get a state mortgage interest deduction.
   • Private Mortgage Insurance (PMI)
     If you have PMI, you can also deduct money you paid for mortgage insurance premiums.
   • Property Taxes
     You may deduct money you paid in property tax payments, as well as local and state income taxes and sales taxes. Down the road, depending on how much profit you make when you sell your home, you might not have to pay capital gains taxes on the earnings.
     *Be sure to consult a tax advisor to learn how buying a home can impact your taxes.
6. Build Credit - Your payment history makes up 35% of your credit score, so on-time monthly mortgage payments can help keep your score in good shape. Paying on time can also help you build credit, which can make it easier to get other types of financing.
7. Freedom to Personalize - One of the biggest benefits of homeownership is making it your own. Unless you live in a community governed by a homeowners association, you can tear down walls, make additions, and decorate your home in almost any way you like. Renovating your home may also increase its value, so it’s a win-win situation.
8. Build a Sense of Community - Compared to renters, homeowners usually stay in the same place longer. This helps build neighborhood pride and stability, along with an increased sense of community.

When You’re Ready to Make a Move

Before you dive into homeownership, you’ll want to consider the current market, your finances, and your financial goals. If you’re seriously considering buying a home, it’s a smart move to get pre-qualified. This will help you determine how much you can afford and what your monthly mortgage payments might look like. If you have questions or want help planning for a home purchase, reach out to a local Pinnacle Bank Mortgage Lender.