Are you planning to buy a home? Why do you need to do so? Homeownership is one of the biggest and most significant investments you will make. It is a significant decision that is full of benefits. Note that there are non-financial and financial considerations you need to make before you buy a house and you need to ensure you are not making rash decisions.
But if you have been planning to buy a house, you may have already saved enough for the down payment. Perhaps you have identified a nice property at Movoto.com. Go ahead and buy that property; you will not regret you did it. Below are some of the rewards of owning a home.
1. Reduced Interest Rates
Rates of interest have been over the years low. This means it is cheap to borrow money, and repaying the mortgage is way affordable. Also, the low-interest rates may mean buying a house is less expensive than renting. However, you should take into consideration water rates, strata fees and other costs.
2. It is a Better Investment
In the short run, prices of houses move in cycles. But its value may appreciate after many years meaning you can earn a reasonable return if you sell it. If you stay in a rented apartment, use a buy vs rent calculator to determine which option will give you the most benefits for the time you plan to live there. Ensure you also add assumptions like rent increases in future because most of the times landlord raise rents over time.
3. Building Equity
After you deduct the remaining amount you need to pay to settle your mortgage loan from the home’s total value, the figure you get is your equity. This equity is the value of your house that is yours. Equity is built in two ways:
a) With monthly loan repayments because the more you repay the loan, the higher the value of the home which belongs to you. In a way, loan repayment is a saving because it builds your equity. You can tap into these savings years later by selling the house.
b) Over time, the value of homes increases, creating more equity.
4. Fewer Tax Deductions
Owning a house can reduce the amount you pay in income taxes. Property tax and mortgage interest payments can be exempted from federal taxes in addition to other state taxes. Discount points on loan and specific closing costs also may be deducted from the tax you pay. When you have just started paying your mortgage, it can be draining, and these tax deductions will save you some money.
5. Stability and Peace of Mind
Knowing you own a home gives you peace of mind. Renting a house comes with uncertainties because you are not sure how many years or months you will live in it. You also keep on searching for the next house you would like to move to. The owner of the house may also have listed it for sale, meaning you need to relocate. If you want to stay in a particular area for many years, it is better you buy a home instead of renting.
After retirement, you want to settle in one location, and that means you need to purchase a home early to avoid paying mortgages when you are old, which can be stressful.
6) Create Your Own Home
There is a way you desire your house to look like and that one cannot be done on rented property. When you buy a house, you can paint it the way you want, have pets and furnish it your style.
7. Inflation Hedge
Rents and housing costs usually outpace the inflation rate. Even though the US rates of interest have been kept low by the Federal Reserve, soon inflation will make buying a home costly. Think why in the United States, there is a high demand for houses at the moment. Homes are hard assets that keep your money in the long term.
8. Borrowing Power
The more you clear your mortgage loan, the more equity you build meaning you can get a home equity loan to fund other home purchases, children’s education, pay medical bills, buy a new car etc.
9. Capital Gains
What is a relief? The 1997 Taxpayer Relief Act states that you can be exempted from paying capital gains taxes on your initial gain of $250,000 if you are not married, and first gain of $500,000 if you are married as long as you reside in the house for two years in the previous five years. Every two years you can benefit from these exemptions.
10. Credit Builder
Paying your mortgage loan improves your credit history, which lenders use to determine if they can lend you, amount, terms and rates of the lending. Access to credit can help you buy another home, pay other debts or improve the house.
Buying a house is a great investment, and if you had not yet decided to purchase a home, hopefully, these benefits will help you make the right choice.