As a tenant, you’ve probably heard that owning a home has many benefits. Whether you’re happy with the rental or considering buying it, it can be helpful to know the benefits of homeownership and why it’s appealing.
This Redfin article highlights the eight benefits of owning a home and tips on how to make homeownership worthwhile. Whether you’re looking for a home in Portland or considering buying a condo in San Jose, California, discover the benefits of homeownership and determine whether buying a home is right for you.
8 Benefits of Owning a Home
1. Building Home Equity
2. Evaluation of household value
3. Tax benefits
4. Predictable monthly payments
5. Freedom to design spaces
6. Long-term stability
7. Access to Home Equity Funds
8. Help me improve your credit score
1. Building Home Equity
Home equity is a part of your home that you own and is calculated as the market value of your home minus what you owe on your mortgage. When you pay for a mortgage, and if your home is appreciated for its value, it will grow over time.
For this reason, many people plan to live in their homes for several years to build equity and sell for profit. Some of the benefits of building home equity include:
Use the proceeds from sales in your home as a down payment at your next home. The ability to buy a bigger or more expensive home. Paying back your home means you can live without a mortgage. Use your capital to borrow money for improved homes or other major expenses.
There are many ways to access your home equity, but we’ll go into it in more detail later.
2. Your home may be appreciated over time
Usually, a home will increase in value over time (thank you) and become one of the more reliable investments. For example, you buy a house for $400,000 and increase by 2% each year. Five years later, your home’s value could increase to $440,000. When it’s time to sell your home, you may make a profit from the sale.
There are many ways to check the value of your home. You can use online tools to estimate how valuable your home is, or see what a nearby property has recently sold (called a real estate comp). Other ways to increase the value of your home include doing valuable home improvements, such as kitchen upgrades and new roofs.
3. Tax benefits
Owning a home has several tax benefits. When you itemize your tax returns, the following are the tax deductions you may qualify for:
Mortgage Interest Deduction: You may be able to deduct the interest paid on your mortgage to a certain amount. Property Tax: You may be able to deduct state and local property taxes paid to your home. Mortgage Credit Certificate: For qualified homeowners, taxes can be reduced to up to $2,000.
4. Predictable monthly payments
Unlike rentals where landlords can raise rents, fixed-rate mortgages offer stable monthly payments. Property taxes and insurance may vary slightly, but principal and interest payments remain the same as homeowners.
If interest rates drop, you may also have the opportunity to refinance your loan. This could reduce monthly payments and lead to even better deals.
5. Freedom to design spaces
When you own a home, you can do whatever you like in the space. Whether it’s a wall tinkering, kitchen renovation, or built-in installation, you have the ability to create your own space. Rentals require you to follow the rules outlined in leases. You may be able to paint the walls on rental, but you will have to repaint them when you go outside. In your own home, you don’t need to worry about it.
6. Long-term stability
Owning a home provides stability that doesn’t always offer rentals. You don’t have to worry about moving because your landlord has decided to sell the property or increase your rent. You are likely to have lived in the home for several years, which gives you the opportunity to build a community in this area.
7. Access to Home Equity Funds
As mentioned above, home equity has many benefits. You can borrow from household capital to fund other purchases and plans, such as weddings, second homes, house renovations, and debt repayments. There are several ways to take advantage of your home equity:
Home Equity Loans: Home Equity Loans allow you to take away your loans from your home. This is a fixed-amount loan with a repayment schedule, but it often has lower interest rates than personal loans and credit cards. Home Equity of Credit (HELOC): HELOC allows you to open a credit line for a set time, allowing you to withdraw funds if necessary. There is also a HELOC repayment schedule. Cash Out Refinance: Cash Out Refinance replaces your current mortgage with a new, large mortgage. You will receive a lump sum of differences between the two loans.
8. Help me improve your credit score
If you have a low credit score when purchasing a home, owning it gives you the opportunity to improve your credit score. Paying monthly mortgage payments on time indicates that you are a responsible borrower and you can trust to pay off your loan. There are many benefits to having a higher credit score in the long term, such as improving loan terms and accessing more loan types.
Tips for making homeownership worthwhile
While there are many advantages, there are also disadvantages to owning a home. Here are some tips to help you make homeownership worthwhile.
I just buy a house that I really have enough room to spend. Don’t make the mistake of buying a house on a budget that may be tough to make monthly payments. Full understanding of the terms of the loan: Some loans allow you to buy with a small (or countless) down payments, but they may have drawbacks such as additional payments and high interest rates. When you’re ready, buy it instead of before. Take the time to save the money you need and improve your credit score or pay off your debts if your lender recommends. Work with real estate agents and lenders you trust: A good agent can guide you whether your home is a good investment, but a good lender will show you your loan options, so compare multiple lenders to find the best rates.
