Advantages Of Owning A Home

Why buy a home

While some people like the flexibility of renting and being somewhat free of maintenance and at the same time having the ability to move often, others choose ownership for other reasons. It would be great to say that the main reason for owning a home is the pride of ownership, but that’s not quite true for many. Their reasons are strictly economical and there are clear financial advantages of owning a home.

Building Equity
The difference between what is owed on a home (principal balance) and its market value is called equity. In the early years of a home mortgage, most of each monthly payment goes towards interest, but as time goes on, it gradually goes more and more toward the principal balance (what is owed). Through the years, payments will reduce this balance, thus raising the equity. Plus, if the home goes up in value, the equity will rise even more. Equity is like a savings account and it could prove very important for future needs such as a retirement plan, or big purchases.

Tax Deduction
By law, mortgage interest and property taxes can be deducted from U.S. Federal Income Taxes and from some state income taxes. This results in significant tax savings, especially in the early years of a mortgage, when interest payments are higher. And the tax savings alone may make it less expensive to buy than to rent.

Payment Stability
Unlike renting where payments can increase over the years, a fixed-rate mortgage payment will remain the same for the entire term of the loan (unless the loan is refinanced). Other types of loans could vary in the structure of payments and there always could be slight adjustments for tax and insurance increased, but owning a home can result in being able to depend on stable payments for years. During times of inflation (when rents and homes prices go up), renters end up paying more each month while home owners increase their equity while making that same monthly payment.

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