Do you know the many benefits of owning a home? Before even considering buying a home, you should determine if owning a home is really the right fit for your life. I always like to consider (and list) the Pros and Cons when I’m trying to make a decision. Here is a good start for your lists because identifying the good and bad will help make the choice an easier one.
Consistent monthly payments
If you will be taking out a mortgage to buy a home, you will most likely apply for a fixed rate mortgage. This will ensure that your monthly payment will not change for the life of your loan (15, 20 or 30 years). If you are currently renting, you can definitely appreciate this great benefit of owning a home. These consistent, stable payments can help you create a realistic and manageable monthly budget. Although insurance and taxes will fluctuate over time- owning a home will most most often cost less than monthly rent.
Opportunity to build equity
Equity in real estate is the difference between the current market value of a home minus any liens on the property, such as a mortgage. It is basically the amount of money you could get back out of the house if you were to sell after paying all lienholders. Equity is built by making monthly payments toward the principal of the loan as well as increases in market value. Building equity is a great benefit of owning a home.
Less expensive than renting in the long run
There are many costs involved in buying a home, such as any down payment, lender fees, transfer taxes and homeowners insurance. These upfront expenses are substantially more than just paying monthly rent to a landlord, yet, over time owning a home is cheaper than renting which is a great benefit. That is the monthly mortgage, taxes and insurance is usually less than renting a comparable home.
Provides tax advantages
Everyone pays taxes, whether we like it or not! If you are renting a home, you may not have too many opportunities for deductions, which means you pay tax on more of your income. When you have a mortgage on a home, you are able to deduct the interest you pay on the mortgage. And since in the first few years, the bulk of your monthly payment will be interest, that can be a substantial amount. You can also deduct the cost of any mortgage insurance. I do suggest speaking to a professional accountant to get a good understanding of your specific circumstances.
Ability to make changes – Home is the place you live everyday – it should be a reflection of your style and taste. If you rent a home or live in someone else’s home, you often cannot make changes that can make you feel more at home. If you own the home, you have the freedom to paint or hang décor but also to make improvements that can increase your property value.
Build your credit
Your credit score can be used by employers, insurance companies and lenders to measure the risk of doing business with you. It could win you lower rates or more favorable terms. Of the many factors that impact your credit score, one of the most important is your length of credit history. Since the length of a mortgage is usually 15, 20 or 30 years, having a mortgage on your credit history will lengthen the average of your credit accounts. As an added bonus, every month that a mortgage is paid on-time it shows that you’re a responsible borrower which will raise your score immensely.
Return on investment
A smart home purchase will almost always appreciate, depending on the local market conditions. Before purchasing a home do research on the area – since markets (even one town over) can have factors that will affect value. Paying extra on the principal of your loan will build more equity sooner and reduce the amount of interest paid over the life of the loan.
Location preference
Purchasing a home in the neighborhood you prefer locks you into the location of your choice!
Improved stability
Buying a home is a long term commitment. When all of the other benefits listed above come together – you will likely stick around in the home you chose, where you are building equity and enjoying tax breaks!
Pride of ownership & community involvement
Building relationships with neighbors, local businesses, and community service employees often mean more when you have ‘invested’ in the community.
If you are ready to start looking for your own home, read about how I work with buyers – or give me a call 914-447-5847.