What Are The Benefits Of Owning A Home?
Owning a home is often referred to as the “American Dream.” There are many obvious benefits of owning a home and also some that are not so obvious.
One of the first steps to buying a home is to determine whether owning a home is the right fit for yourself. It’s important when making any decision that you strongly consider both the PROs and CONs of what you’re deciding on.
If you’re currently living with family, friends, or renting a property and you’re considering the purchase of a home, below are some of the best benefits of owning a home. Understanding what the benefits of home ownership are can really help make the decision whether to buy a home easy.
1.) Stable Monthly Payments
If you’re going to be buying a home by obtaining a mortgage, it’s highly likely that the mortgage product you’ll use for the purchase will be a fixed rate mortgage since they’re the most popular type of mortgage. With a fixed rate mortgage comes stable monthly payments, which is one of the best benefits of owning a home.
One of the wildcards to renting a property is the unknown that comes with the monthly payments, year over year. It’s very plausible that the monthly rent payments for a property can change from year to year upon the renewal of a lease agreement.
The stable monthly payments that come with owning a home can provide some great peace of mind as it makes it easier to create a predictable monthly budget. Certainly monthly payments can change when owning a home if property taxes or homeowners insurance were to change, but the amount of change in property taxes is normally a very small amount.
An increase in yearly taxes of $500 would only change a monthly payment by approximately $40.00. The good news is that property taxes don’t change very often in most areas, maybe every 4 or 5 years!
2.) Opportunity To Build Equity
When you hear people talking about real estate and owning a home, one of the most popular words you’ll likely hear is equity. “What is equity” is one of the most commonly asked questions from home buyers.
Equity in real estate is the probable market value of a home minus any liens against the property, such as a mortgage. One of the great advantages of home ownership is the opportunity to build equity.
The longer that you own a home, the more you’ll pay towards the principle balance of any liens. As the balance of any liens against a property gets lower and hopefully the value of the property increases, the larger the equity.
3.) Cheaper Than Renting Overtime
There are many costs to buying a home, such as the down payment, appraisal fee, and homeowners insurance. The upfront cost to buy a home is substantially more than just paying monthly rent to a landlord, however, over time owning a home is cheaper than renting which is a great benefit.
In most Cities across the world, if you were to compare a rental property and the monthly mortgage of a comparable home, the cost of ownership is typically much less.
Recently while working with a Rochester NY first time home buyer who was currently renting a 2 bedroom apartment in the City, they could not believe the difference between renting and owning a home. The 2 bedroom apartment was costing the buyer $1,000 per month plus utilities. The buyer ended up recently closing on a 3 bedroom, 1.5 bath 2-story home in one of the Greater Rochester area suburbs for $100,000 and their monthly mortgage was only $900.00. Not only are they taking advantage of these benefits of owning a home but they were able to get a bigger place to live for less money per month!
4.) Owning A Home Provides Tax Advantages
There aren’t many people who enjoy paying taxes but it is a necessary evil. A great benefit of owning a home are the tax advantages that it provides. Buyers who have a strong understanding of important real estate tax tips quickly realize that owning a home provides some solid tax advantages.
Arguably the biggest tax advantage of owning a home is the option to deduct paid monthly interest from your tax returns. During the first several years of the term of a mortgage, a borrowers monthly payment is almost all interest. This means that at the end of the year there’s a nice deduction.
In addition to the ability to deduct monthly interest from a tax return, a borrower can also deduct mortgage insurance payments and other home-related purchases. It’s recommended that if you’re unsure how owning a home will impact your taxes that you discuss with your accountant so you fully understand how owning real estate will impact you come tax season.
5.) Freedom To Make Changes
When someone is weighing their options as to whether they should keep renting or buy a home, one of the biggest factors is often the ability to make changes that ownership provides. When you rent a property, it can be difficult to make even the simplest change such as painting a room as it’s often spelled out in a lease that you cannot alter the property in anyway.
A huge benefit of owning a home is the ability and freedom to make changes. Whether it’s something as simple as painting a bedroom or something complex such as a complete kitchen remodel, when you own a home you can make changes as you see fit.
Not only is the ability to make changes to a property a great way to make a house feel like a home, it also can give a nice bump in the properties value. There are many budget friendly home improvement projects that add value to a home and also projects that can cost thousands of dollars, but either way, owning a home gives the freedom to make changes as you please.
6.) Build Your Credit
There are many factors that impact a persons credit score, one of the most important being the length of credit history. A great tip for improving a credit score is to improve average length of credit accounts and owning a home can accomplish this.
Since the length of a mortgage is typically 15 or 30 years, having a mortgage on your credit history is a great way to lengthen the average of your credit accounts. In addition to improving the average length of credit accounts, each and every month that a mortgage is paid on-time it shows that you’re a responsible borrower which not only can improve a credit score but also improves the chance of approval for future credit accounts.
7.) Solid Investment
There are many options when it comes to making an investment. Owning a home is a solid investment which is another fantastic benefit.
While a home is large purchase, it also provides a much better return on investment than other large purchases such as a car. When you purchase a car, the depreciation begins as soon as you drive it off the dealers lot.
Owning a home provides the opposite as in many cases real estate will appreciate, depending on the local market conditions. Real estate markets are different even if they are close in proximity and it’s critical before buying a home you have an idea what to expect in terms of potential appreciation over the years.
An experienced real estate agent cannot predict exactly what’ll happen with home values in an area, but they certainly can provide some information on the values over the past several years.
8.) Pride Of Ownership & Community Involvement
Owning a home provides many buyers a sense of pride in their home but also their community. The pride of ownership and community involvement that comes with owning a home is another nice benefit that should be considered.
Many homeowners take huge pride in their community and the relationships that come with being involved in their community. Building relationships with fellow neighbors, local politicians, and local community service employees, such as the local firefighters is something that is difficult to establish without owning a home and being involved in the community.
9.) Choice Of Location
The number of options available for rental property is often limited, depending on your location. If this is the case in your area, this means that the location you can live in is often limited as well. For example, in the Greater Rochester area there are very few rental opportunities in many of the suburban areas.
Buying and owning a home gives you more of an opportunity to pick where you want to live. One of the most important factors for many buyers is the location of the home.
Selecting a neighborhood to buy a home in is very important and is also one of the luxuries of owning a home. Buyers have the ability to pick where their home is located in proximity to their employer, what school district the home is located within, and many other location based options.
10.) Improved Stability
One common trend among people who rent a home or apartment is they’re frequently on the move to new places. It’s fairly uncommon for people to remain in one apartment for 5, 10, or 15 years.
Owning a home improves stability for many people, which is a nice perk. Since buying a home is a long-term commitment and rather large investment, moving every few years is unlikely.
Buying a home and turning around to sell a couple years later can be difficult since the amount of equity built after a couple years is relatively low. Not having enough equity in a home can lead to having to come out of pocket to cover the costs of selling a home or even worse, a short sale. While it’s impossible to predict where exactly you’ll be in a couple years from now, if you’re purchasing a home you need to be somewhat confident you plan on staying in the property for an extended period of time.
People who’re buying a home are often looking for that extra stability that comes with owning a property!
Final Thoughts On The Benefits Of Owning A Home
As you can see, owning a home comes with many great benefits! It’s important that before you go out and purchase a home you’re fully aware of the above benefits. Owning a home is so much more than just having a place to live!