Some people rent a home because they think that they can’t afford to buy one. Others like the flexibility that comes with renting an apartment or house. When you rent, you can live in a neighborhood for as little or as long as you want. You’re also free of most maintenance responsibilities. Your landlord handles repairs, for example.
But there are many reasons for owning a home.
You Build Equity!
In the early years of most mortgages, the majority of your monthly mortgage payments go towards paying the interest on your mortgage. Over time, an increasing amount of the monthly payment goes towards reducing the mortgage balance, or “principal.” This is called “amortization.”
As you make payments, you reduce the principal and increase your share, or “equity,” in your home’s value. If your home increases in value through “appreciation”—an increase in the market value of a home—your equity will build even faster.
Building equity in your home is important. For many people, it lets them plan for retirement, pay for college, and attain other future goals.
You Gain Tax Advantages!
When you own a home, you may be allowed to deduct mortgage interest and property taxes from your federal income taxes and from some states’ income taxes. These deductions may mean significant tax savings, especially in the early years of the mortgage when interest makes up most of the monthly payment. Consult a tax advisor for information about your individual circumstances.
After calculating your taxes, you may find that it’s cheaper for you to buy than to rent. Keep in mind, however, that to gain these tax advantages, you must file an annual income tax return with the U.S. government.
You Can Rely on Monthly Principal and Interest Payment Stability!
If you select a fixed-rate mortgage, you will pay the same monthly principal and interest for the term of your loan. (However, your monthly mortgage payment could increase slightly if taxes and insurance costs go up throughout the term of the loan.) Unlike renting, this type of payment will remain the same month after month, even when inflation leads to higher prices.
You Can Have a Place for Your Family to Live and Gain a Sense of Community!
When you own a home, you can be secure in knowing that your family will have a place to live. When you rent, you might not always be able to renew your rental contract and then will have to find a new place to live.
Owning a home also allows you to get involved in the well-being of your community. You may feel a greater sense of belonging and permanence by owning your own home.
Once your mortgage is paid in full, the home is yours. You can also pass your home on toyour children or other family members as an inheritance.
