In the midst of a global pandemic, our homes have become much more than a space that provides a roof over our heads. We've experienced sheltering in place for several months, so having a place we can call our own has become invaluable. For many, our homes have also turned into our workspaces and even schools for our children.
Moreover, a recent survey by Gallup just ranked real estate as the best long-term investment among several options, with 41 percent of Americans seeing it as superior to stocks, gold, savings accounts, and bonds.
But unlike other investment options where the benefits are purely financial, owning a home provides both financial, non-financial, and social advantages that allow every homeowner to take great pride in. As National Homeownership Month kicks off this June, we'll cover some of those benefits that will hopefully make you more excited to kickstart your homeownership journey, or even celebrate if you already have a place to call your own.
Building equity
Home equity refers to the value of your property that “you truly own.” It is your property's current market value minus the amounts owed on any mortgages or liens against the property. Owning a home builds equity because equity grows with each payment you make toward your mortgage, which brings you closer to owning more of your home.
It’s opposed to making monthly payments to your landlord if you’re a renter, where you will own nothing no matter how long you stay there. Performing routine maintenance on your home and other renovations that help increase its resale value is also another way to build equity.
Your home equity is a form of forced savings that is essentially part of your net worth, which means you’re preparing for your future since you can use it down the road to help you accomplish other huge financial goals.
Helps build a strong credit history
A mortgage is considered “good debt” so as long as you're consistently making your monthly loan payments on time, you are showing to other lenders that you are a good borrower. This helps to build your credit and proves your credit-worthiness, which can be helpful when you may want to consider other loans in the future, such as for buying a car, remodelling your home, or getting a business loan. It’s an additional perk that many buyers may not consider at first but will prove to be beneficial later on.
Better control and stability over housing-related costs
One of the most significant financial benefits of being a homeowner, and the biggest advantage versus being a renter, is that you will have better control over your monthly housing payments. Unlike rent costs that continue to go up each year, you'll have peace of mind knowing that your monthly mortgage payments remain relatively steady despite rising interest rates and periods of inflation, especially if you have a fixed-rate mortgage where the cost of your home is locked in for the term of your loan.
Other costs of owning a home like property taxes and insurance premiums may fluctuate, but this doesn’t typically happen as often as rising rents. You can also choose to install energy-efficient appliances and features that can help save you thousands of dollars in utility bills every year. With this kind of control, you can budget accordingly and make better short- and long-term financial decisions.
Tax deductions
Another financial perk of being a homeowner is that you qualify for many tax deductions and tax credits. To make it clear, a tax deduction reduces your adjusted gross income, which in turn reduces your tax liability. Meanwhile, credits represent money taken off of your tax bill.
While we won't elaborate on them further, the most common tax deductions for homeowners include:
- Mortgage interest
- Points
- Real estate taxes
- Private Mortgage Insurance (PMI)
- Home office deduction
- Medically-necessary home improvements
- Capital gains tax exclusion
- On the other hand, tax credits may be available for those who were issued a Mortgage Credit Certificate (MCC). You can also check if your state offers tax credits or rebates for energy efficient-improvements you’ve made to your home.
