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If all those binges of home-improvement shows have left you with a hefty amount of home envy, you’re certainly not alone. Homeownership offers a wealth of benefits—and being able to drill holes into your walls or park as many pink flamingos as you want in the front yard is just the beginning. Your home is an expression of your lifestyle, your tastes and your values, but it can also help you build wealth over time, starting with your down payment and continuing as you make your monthly mortgage payments.
Think of your house like a giant piggybank: Every mortgage payment you make shaves off a little bit of what the bank has loaned you and tips more of the home value in your favor. That means when you go to sell years down the road—especially if you sell for a higher price than you originally paid—you’ll have real money in your pocket. You can’t say the same for a rental: Each time you sign that check to your landlord, the money is gone for good. While you get a comfy place to live in exchange, the rent money is certainly not working for you.
4 benefits to buying
Staying in your home long enough for it to increase in value can help ensure your equity grows (and living in a hot neighborhood doesn’t hurt, either). One common rule of thumb states that you shouldn’t buy a home unless you plan on living there for at least five years.1 But every situation is different, so you should run your own numbers.
Challenge:Take advantage of an online calculator to do the math and determine whether home ownership makes sense for you at this time.
Of course there are other less flashy benefits to buying, beyond home decorating and appreciation. You’ll notice them come Tax Day. “If you’re paying property taxes and income taxes, the corresponding tax deduction can help lower your overall tax bill,” says Cathy Derus, a CPA and financial planner. Those interest deductions can really mean big bucks during the early years of your homeownership when the majority of your mortgage payments are composed of interest rather than principal.2, 3
The benefits of homeownership can extend far beyond financial. Building strong ties to a community, establishing roots and maintaining a warm, welcoming home can provide peace of mind and a sense of accomplishment.
“We love having a house we can customize, where the kids can play in the backyard,” says Derus, a homeowner herself. “We feel that sense of accomplishment when we fix things ourselves, and we feel confidence while we pay down our mortgage.” Like many homeowners, she sees her slice of personal property as both a sound investment—and more importantly, a great place to live.
- Homeownership has many benefits, from customizing the paint on the walls to building up equity.
- Consider your location and the time you expect to stay in your home before taking the next steps, as both could have an impact on the appreciation potential.
- Mortgage payments may affect your taxes, particularly the first few years, as you pay more interest.
Challenge yourselfIs now the right time to move from renter to homeowner? Maybe … but maybe not. Keep reading and learn how to get started.
1 “Follow the Five Year Rule to Make Sure You Don’t Lose Money on Your House,” Feb. 11, 2016, Life Hacker
2 “Freshen Up On The 7 Financial Benefits Of Home Ownership This Tax Season,” Feb. 28, 2014, Forbes/Trulia
3 For more specifics, consult a tax professional.
This content is educational in nature and is not an advertisement for a loan or business solicitation. It does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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