The biggest issue in today’s market, even if you have a steady job and family, is whether buying or renting is the right move for your family. There are certainly benefits to both approaches, but unfortunately, not everyone is in the position to purchase their own home. That said, if you’re able to qualify for financing, there are numerous financial benefits of owning a home — some that you may not have considered.
1. Build home equity
Unlike renting a home or apartment, you can build home equity when purchasing your own home. Equity is the difference between what you owe the mortgage company and your mortgage balance. Your mortgage balance decreases each month that you make a home loan payment to your lender. The longer you own the home and make payments, the less you’ll eventually owe the mortgage company; and as your house appreciates in value, you’ll gain equity.
This is a major perk of owning a home. When you have equity, you can borrow against your home with home equity loans or home equity lines of credit. And if you refinance your house in the future, you can borrow cash against your equity. In addition, when you’re ready to sell your house, equity directly impacts your profit. The more equity you have, the more cash you’ll receive from the sale. You can put this cash toward your next home purchase.
2. Tax benefits
If you own your home, you can write off certain mortgage-related expenses, such as your mortgage interest and certain closing costs when purchasing or refinancing the house. The ability to write off your mortgage interest can significantly reduce your taxable income, thus lowering how much you owe the federal government.
3. Cheaper house payment
Depending on where you live, buying a home might be cheaper than renting. Therefore, if you can qualify for a mortgage loan and acquire a cheap interest rate, you can shave hundreds of dollars off your monthly housing expense. This is an excellent way to free up cash in your budget.
Use the extra money for other purposes, such as increasing your retirement contribution, paying off credit card debt or building your cash reserve. Since buying a house involves closing costs and a down payment, a cheaper payment can help recoup your savings quicker.
4. Option for a reverse mortgage
A reverse mortgage is a “government insured loan that enables seniors to gain financial independence from their ever increasing living expenses”, says the American Advisors Group.
Even if retirement is 20, 30 or 40 years in the future, buying a home now can help protect your financial future. As a senior, your income will undoubtedly decrease, and you may be unable to care for certain expenses in your later years. If you buy a home now, and pay off your mortgage by the time you retire, the equity in your home can be converted into tax-free cash — and you never have to make a payment.
Home equity in your later years is an excellent way to get rid of credit card debt, medical expenses or maintain your standard of living. And the best part — you maintain ownership of your home.
“You continue to own your home and there are no credit scores or income requirements”, says AAG Reverse Mortgage.
5. House-payment free in the future
Renting a home or an apartment might be easier. You don’t have to worry about home maintenance or repairs, nor do you have to save for a huge down payment. But unfortunately, if you live your life as a renter, you will always have a house payment. This is not necessarily the case if you purchase a home.
As a homeowner, you’ll eventually pay off your home loan. And once you own your house free and clear, you can use that money for other purposes. A paid off home during your retirement years is a bonus. Without a large housing payment hanging over your head, you can get more enjoyment out of life.
In the end, you have to decide whether renting or buying is the right move for your money. But given the numerous benefits of owning a house, taking this leap is certainly worth consideration.
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