There are many benefits to home ownership. Many of the benefits of home ownership are tied into finances even benefitting owners at tax time. Here are some of the financial benefits home ownership can bring.
1. Ownership Makes You Money
The key here is buying a home you can truly afford, so you don’t find yourself underwater and needing to sell. Owners are going back to the standard their grandparents once lived by. Don’t get in over your head with a loan that stretches you financially live within your means and build wealth slowly. Don’t buy a home you know you will not be living in for very long.
2. Building Equity
Equity is the amount your home will sell for minus the money that is owed on the mortgage. You build the amount of equity in your home simply by making your mortgage payments. Every month a portion of your payment goes to the principal or what you owe on the home and the rest goes to interest and insurance. With every payment you make you owe less on your house. Some financial experts advise you to put extra money on the principal every month if you can afford to in order to make your equity build even faster. Equity also grows faster the more payments you make as the amount of interest you pay on what you still owe goes down.
There are a few different deductions you can claim on your taxes when you own a home.
Mortgage Interest- owners are permitted to deduct the amount they pay in interest from their tax payments every year. In the early years of ownership, this can add up to a significant deduction.
Closing Cost Deductions– if points or origination fees were paid by either you or the seller these can be claimed as well.
Property Taxes- all property taxes paid on primary residences and vacation homes can be deducted on your tax return
Equity Lines of Credit- if you have taken all of your credit cards and moved them over to your home equity line to save money on interest you can claim the amount in interest paid as a deduction
Capital Gains- if you have lived in a house for more than two years you qualify to keep up to $250,000 for a single person and up to $500,000 for a married couple in profits without paying a capital gains tax.
4. Buying is Cheaper than Renting Over Time
When you rent you are paying your landlord with the benefit of a place to live and no obligation making moving quickly less hassle. If you own a home over time you are paying more and more of that home off and eventually your payments will no longer need to be made. With renting you will owe rent to a landlord until you move there will never be a period of not having to make payments.
Home ownership is proven financially beneficial as long as you are able to afford it. Before buying it is crucial to look over all expenses and be certain home ownership is something within your financial means.