Having good credit is one of the best ways to maximize your ability to build a healthy financial future. Home ownership should be a part of that equation. Whether you see owning a home as part of the American dream or not, there are several important factors that make purchasing a home a great financial decision. If you’ve been thinking about becoming a homeowner, here are 6 key reasons for you to consider.
Ownership provides you Tax benefits.
The US Tax code incents home ownership by allowing home owners to receive a tax deduction for their mortgage interest expense, ultimately decreasing your tax liability. The way it works is that at the end of every tax year, home owners receive a copy of IRS Form 1098. Mortgage companies are required to send every mortgage holder, a copy of this form, (1098) which provides the total amount of mortgage interest paid on a particular loan for the tax year. Please note that the tax deduction is only attributed to the mortgage interest not the mortgage principal.
Fixed monthly housing expenses
According to a recent Bloomberg Report, almost 41 million U.S. households spend more than 30 percent of their income on housing. The reality of a growing population creating a higher demand for housing is affecting the cost and the options for housing. Purchasing a home via a conventional mortgage assures you the predictability of a fixed payment for the life of the home loan. In contrast to being a leasee who has less control from year to year in terms of what the monthly housing payment would be, particularly over a period of 2 or 3 decades. This is also a very important consideration in planning your long term financial goals.
Building wealth through asset appreciation
One of the more significant ways families are able to build wealth is through property ownership because home values appreciate over time. According to Zillow economists, “home prices have appreciated at an average annual rate of 3 and 5 %, depending on the index used for the calculation, home value appreciation in different metro areas can appreciate at markedly different rates than the national average.” Given that some 85% of the home loan market are 30 year fixed rate mortgages, home owners will have three decades of appreciation to look forward to, provided that nothing catastrophic happens.
A home mortgage is the cheapest credit you can purchase
A home mortgage is a loan secured by a home or real property which is in effect used as collateral to make the loan. There are other factors to consider such as creditworthiness and capacity to repay. As a result secured loans are less of a risk to lenders and are priced lower than unsecured loans, in which case a lender may be relying on the proven track record and capacity to repay of the borrower. Also in the case of a borrower default lenders are able to retain the collateral to offset the debt.
Investing in both the stability of your family and community
Owning a home give families a place and a space to create community with themselves and with those around them. Maybe it’s nostalgia but I’d like to think that everyone needs a north-star, a ground zero, a place to create childhood memories or neighborly camaraderie. Ultimately, stability is such an important component in the fabric of our existence. Whether it’s our immediate families, our communities or just our overall well-being.
Leaving a legacy for the next generation.
A home is more than just a good real estate investment it can become part of a family legacy. It holds both financial and sentimental value. As home owners prepare for retirement, estate or succession planning, ensuring the proper steps are taken to secure the family’s key assets are of tremendous importance. There are several reasons why leaving a home as an inheritance is extremely valuable. It provides the benefactor(s) a sense of stability, as well as a financial spring board from which they can launch their own lives as opposed to starting from scratch.