Historically low-interest rates may have you considering making the leap from renter to homeowner. But, interest rates alone should not be the sole deciding factor. As you weigh the pros and cons, there are numerous other benefits that may help you make your decision more confidently.
"While it may not be for everyone, homeownership - over the course of your lifetime - can yield huge rewards, both financial and personal," said Kazantzis Real Estate Owner and Agent Andrea Kazantzis. "A real estate expert can help you navigate the process, ensuring you make a decision that's right for you."
Building Equity, Building Wealth
Homeownership, more so than income alone, is one of the main ways Americans accumulate wealth, so long as they are buying a home they can truly afford.
You can pay rent for years, and you'll never own anything in the end. You're paying for the ability to live in someone else's asset. However, when you own a home, with each mortgage payment you're building equity in an asset you will own.
Since a mortgage is front-loaded with interest, equity builds slowly at first. However, over time, the amount of interest you pay gets smaller and smaller and a bigger portion of your payment goes toward paying down the actual loan amount, enabling to you build equity even faster.
In addition, as the home increases in value, it also creates more equity for you.
There are tax benefits to homeownership. Not only can you deduct interest you pay on your mortgage, but you may also be able to deduct interest on home equity loans, property taxes, and some closing costs. This is especially beneficial for new homeowners when the majority of your mortgage payments are comprised of interest.
Keep in mind, recent changes to the tax code have changed the tax benefits for homeowners. You'll want to consult a tax professional to find out how the rules would apply to your specific circumstances.
Unlike credit card debt, a mortgage is considered "good debt." Paying your payment on time each month helps build a strong credit history and lets creditors know that you are a good borrower. This makes it easier (and cheaper in the form of lower interest rates) if you need to take out loans for a car, home improvements or other major expenses.
It's All Yours
It's undeniable, there is a certain level of freedom in homeownership that renters may not necessarily enjoy. When you own you're own home, if you want to paint a room, renovate or make other changes, you don't have to ask a landlord or property manager for permission.
Unlike rent, which can go up every year or with each new lease agreement, a fixed-rate mortgage will be paid off in steady, stable payments. You'll know what you're monthly payment is for the next 15 to 30 years. Changes in home insurance or property taxes can affect your monthly payments, but the amounts are less likely to fluctuate as often as they are if you are renting.
Not for Everyone
While homeownership definitely has it's advantages, there is a cost that comes with homeownership.
Before you even sign on the dotted line, you'll need to come up with a downpayment and closing costs.
In addition, buying a home is a longer-term commitment and many of the benefits outlined above may take years to realize. If you need to move frequently, then buying a home may not be the best option for you.
While there's greater freedom to do what you want with your property, it's also your responsibility when things go awry. You'll no longer have a landlord to fix a plumbing or electrical issue. For these situations, it's best for homeowners to have savings set aside to deal with them when they happen.
Even if you're still on the fence about buying, Kazantzis Real Estate agents can answer any questions you may have about the process.