Purchasing a home – the process can seem overwhelming. However, the long-term advantages of homeownership are a very smart investment which will secure your future where the benefits extend beyond simply having a place to live.
One of the most significant advantages to owning a home is building equity. You can’t build equity while renting. As you make mortgage payments, your equity increases, and over time, your home can become a valuable asset to use the equity to finance home improvements, pay for college tuition, or even as a down payment on a second home.
There are two factors which determine equity – the home going up in value and the unpaid balance of the mortgage which is being paid down. You may have heard the term “appreciation”. Appreciation is simply the increase in value which is expressed in an annual amount. Homes have averaged 4% nationally for the past 50 years. Amortization is the systematic principal reduction that occurs with each house payment made.
Here’s another advantage to buying a home – the stability of housing costs. With a fixed-rate mortgage, your monthly principal and interest payments remain the same for the life of the loan, giving you predictable and stable housing costs. This can help in your financial planning.
If you’ve lived in a rented apartment, townhome or home before, you more than likely were not able to have much control over your living space such as painting the walls or changing the carpet. Owning a home means control over your living space, which is quite a significant benefit! You can suit your own needs by making changes and improvements to your home without having to get permission from a landlord. This ability allows you to create a space which feels truly like your own.
And finally, homeownership can offer several tax benefits which will contribute to long-term financial savings. You may benefit from itemizing deductions for interest and property taxes that would exceed a person’s normal standard deduction. Regardless of which deduction a homeowner takes, additional tax advantages apply to home ownership like an exclusion of up to $500,000 of capital gain for married, filing jointly taxpayers and $250,000 for single filers who meet the occupancy and use requirement.
All of the long-term advantages in regards to buying a house are significant – which include building equity, stable housing costs, potential appreciation of value, control over your living space and tax benefits. Even though the process of purchasing a home can seem overwhelming, I guarantee you that the benefits make it definitely worth considering. Be sure to do your research, get pre-approved for a mortgage, and work with a qualified real estate agent to find the right home for your needs as well as your budget.
For more information, download our Buyers Guide and Homeowners Tax Guide.
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