Buying a home is a huge step for many Americans, one that may seem scary or intimidating. However, there isn’t any reason to be afraid of homeownership if a person’s finances are in order. There are actually several benefits of homeownership that outweigh the few benefits of renting.
One of the largest benefits of owning a home is building equity. Equity is the money that a person pays towards the principal of your loan each month and can be used for many things. Since its your money, you can use it how you want; Home renovations such as countertops, adding a room, or building a swimming pool are all examples of how you can apply your equity without having to dip into savings. Also, many Americans use their equity to pay for children’s college tuition. In other words, you are paying yourself when you own a home, rather than paying a landlord.
Equal or Lower Monthly Payments
The average rent for a 4-bedroom house in California was $4,169 as opposed to an average monthly mortgage of $2,542. Although there is a down payment and closing costs associated with getting a loan, the long-term monthly benefits outweigh rent by a long shot. When looking at the average rent and mortgage payments in the US, there is only a $49 difference. Therefore, wouldn’t it make more financial sense to own a home that pays you rather than some landlord?
Rental income is a huge benefit of homeownership because it gives the homeowner more disposable income. Believe it or not, there are more renters now than any time since the 1960’s, giving homeowners the advantage of low vacancy rates, and high demand. The possibilities are endless as the extra funds can be used to pay off the mortgage early, it can be put into savings, or it can be used to pay the bills. There are two ways to utilize renting. First, the traditional method of renting out a room month to month can mean a consistent flow of income. Second, if a person lives near the beach, convention center, or any other major attraction, they can utilize Airbnb to host a traveler. Airbnb has become more attractive than hotels in recent years because a person or family can rent most of the house or a room cheaper than a hotel.
There are a few tax benefits to owning a home. Interest paid on a loan can be deducted from federal income taxes, resulting in less taxes owed to Uncle Sam! Similarly, property tax can also be deducted from a person’s federal income tax. Renting out a room can incur expenses such as paint, shelving, and carpets, but did you know that you can deduct those expenses from your federal income taxes? It’s true, and paired with interest and property tax deductions, you won’t be letting money go to waste.
When a person rents a home or apartment, they are at the mercy of the landlord. A renter can’t make any improvements to their living space without a landlord’s permission. This means, if you want to add a curtain rod or shelving, you will need a landlord’s permission and it may come out of pocket. With homeownership you have the freedom to customize your home however you see fit. You want to paint the walls pink? Not a problem! Another benefit to homeownership that many overlook is being able to make repairs in a timely fashion. Good luck getting a landlord to make repairs within a week as messes pile up.
With all these benefits to homeownership, why continue to waste money on rent? If you have any questions on how to get started on the American dream of homeownership, reach out to a mortgage lender today.