American author L. Frank Baum was correct when he wrote that “There is no place like home.” Millions of homeowners will agree with that sentiment. And more will work towards owning their own home. After all, homeownership plays a large part in the American dream.
The advantages of house ownership became clear during the pandemic. People had to stay indoors and work or study from home. The fear that you’ll find yourself homeless was also palpable in 2020. Despite the restrictions caused by the virus, the housing market remained strong. Homeownership rates even reached 65 percent in 2020.
The stability of the market is due to people’s belief that a home is one of the best investments they’ll ever make. Here’s why owning a home is a powerful financial decision:
Whether you’re renting a two-story house or a small condo unit, you have no say in space design. You can’t paint the wall no matter how much you dislike it. You can’t remodel the bathroom even if certain additions would improve it either.
You won’t have this problem if it’s your home. As a matter of fact, you can even boost your home’s value with the right home improvement project. You can remodel your basement and turn it into a home office or knock down some walls to have an en suite. And if you ever decide to sell your home, you can recoup the money you spent on renovations.
You can’t put a price on security and stability. But the two are good explanations why owning a home is a powerful financial decision. Renting puts you at the mercy of a landlord who can decide one day that they need the property. You will have no option but to move out, which is not an easy process. It’s inconvenient, costly, and drains the emotions. Owning your home means you’ll always have a roof over your head. You can also keep living in a neighborhood where you’re already familiar.
A tax break is enough explanation why owning a home is a powerful financial decision. You can deduct the interest on your mortgage and property tax payments from your taxes. These deductions are a boon since they can help offset the initial cost of buying a home. The money you’ll put out will be high in those first years. It’s because you’ll be paying off the interest on the mortgage, not the principal.
Your loan discount points and closing costs could also be tax deductible in that first year. You could get a large amount of money back based on the points you claim. You can also get a tax break when you refinance your home since you can get a home equity line of credit (HELOC).
Equity is the amount of your property’s value. Computing your equity is simple. You subtract the balance on your housing loan from the total value of the property and structure. The amount left is the equity or the value of your home in dollars.
You can build equity in two ways. One is to keep paying your mortgage every month. Every time you do so, you reduce your loan’s balance, and this increases your equity. The second method is to boost your home’s market value.
Having enough equity gives you several advantages. A common house buying tip experts share is to leverage your home’s equity for your other projects. You can redraw your loan or opt for mortgage refinancing. You can also use your equity to borrow on top of your savings. You can then use the funds you’ll get to pay for your home’s renovation or other large expenses.
When you asked, “what do I need to buy a house?” your realtor said a high credit score would be beneficial. It’s true, and owning a home is also an excellent way to build up both your credit score and credit history. Banks and other lenders look at a mortgage as good debt since you can’t secure one unless your finances are stable.
Homeownership usually goes hand in hand with a good credit history. Paying your mortgage without delays proves you are a good borrower. It also highlights that there’s a minimal chance that you will default on a loan.
A strong credit rating and history are beneficial. It helps when you need to take out loans to buy a car, launch a business, or renovate your home. You’ll have an easier time applying for a loan and better chances of securing approval.
I bet you did a lot of reading about mortgages before buying a house. Many homebuyers focus on how expensive their mortgage is. They fail to realize that these payments are like a savings account. Granted, you don’t get to hold this money, but what you’re doing is putting the funds towards owning more of the property. When you rent, the money you pay goes to the landlord. You won’t get it back. But with a mortgage, every payment returns with interest in the future. It’s why people consider mortgage payments as “forced savings.”
Did you find the article informative? Then you’ll definitely like reading this Checklist for buying a new home.
Are you a first-time homebuyer? Contact Reach Home Loans – one of Florida’s trusted agencies. Our dedicated and experienced team has helped families finance their dream homes. Call us at 954-703-1465 and let’s talk about what you need.
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