The Benefits of Home Ownership
Home ownership imparts a sense a security and control. It can improve your quality of life and provides stability. Renting gives you a place to live, but you’re restricted in what can do, you may be subject to intrusive periodic inspections, and you’re not building any equity for the future.
While intangibles are important, they are subjective and tough to measure. However, home ownership also grants many quantifiable benefits. Here are just a few.
Home Ownership Builds Your Asset Base and Net Worth:
A portion of your mortgage payment goes towards interest, and a portion towards principal repayment. As you pay down the principal, you are increasing your ownership of your asset and creating equity for yourself, not your landlord.
Further, historically home values rise. They may not go up every year, but when measured over a decade or more, the trend is clearly up. To be precise, a lot of this price appreciation is due to the falling purchasing power of the dollar. We all know that a dollar in 2016 purchases far less than a dollar did in the year 2000. By taking on a mortgage, particularly at a fixed rate, you are turning currency inflation to your advantage, as the value of the dollars you owe will decline over time, but the land under your feet remains a tangible asset that can’t be inflated away! The financial benefits of home ownership compound over time.
The Interest on Your Mortgage is Tax Deductible:
While this is not the main reason you would buy a home, it’s certainly an important fringe benefit. It stacks another financial chip in your favor, and it's great to get a break at tax time.
Fixed Monthly Housing Payment:
The U.S. is unique in the world in offering 30 year fixed rate mortgages. Most other western countries are limited to 10 years. Given today’s record low interest rates, a fixed 30 year rate is certainly an attractive option as you will have the security of knowing that your monthly payment will never rise. No more rental hikes!
Of course, if you are looking at a long-term fixed rate mortgage, you will want to also look for a house that you can remain in over the long haul – a home that will grow with your family and needs.
Should you decide to sell your home, you won’t pay any tax on the sale proceeds, even if you sell it for far more than your purchase price. Owner-occupied property is exempt from capital gains tax (with some restrictions – be sure to check with your tax adviser).
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