Everyone has a different financial and personal goals. However, almost everyone agrees that home ownership is a quintessential component of the American Dream. If you’re currently renting, then it may be time to set a new goal: home ownership.
Reasons to Become a Homeowner
Renting allows many people to obtain affordable housing. But for many renters, the ultimate goal should be to own a home. It may take years or even decades to realize, but it’s well worth reaching for. Here are a few of the reasons why:
1. Equity and Security
When you rent a property, you’re essentially flushing money down the drain every time you make a rent payment. You’ll never see that money again – and all it does is buy you another 30 days of use. A home loan is different. When you make a monthly mortgage payment, only a percentage goes towards interest. The rest goes towards paying off the home and building equity. In other words, you could see this money again when you pay off your loan.
Being a homeowner means you’re paving the way for a secure financial future. Every month, the amount of equity you have increases. As a result, you have more to your name this month than you did the previous month. Here’s a handy calculator from Bankrate that will help you determine when it makes sense to buy versus rent.
2. Tax Benefits
Another major benefit of buying a home comes from the tax breaks you get. There are a number of different deductions – and you’ll need to itemize on a Schedule A rather than take the standard deduction – but these are some of the most common:
- Mortgage interest deduction. This is the most common deduction. It allows you to deduct all of the interest you pay towards your home. Since this is generally a sizable portion of your monthly mortgage payment, it can add up to a lot.
- Property tax deduction. Property taxes can be very expensive, depending on where your home is located. The good news is that you can deduct this amount from your income.
- Points paid. If you pay points on a loan, these may also be deductible under certain situations. You’ll have to review your HUD statement and/or speak with your lender and accountant to learn more about this.
- Mortgage insurance premium. Finally, you may be able to deduct your mortgage insurance premium from your income. Once again, this can represent a large tax savings.
Those are benefits you don’t get when renting. And in some cases, they can dramatically offset some of the upfront costs and closing costs you’re forced to pay when buying a home.
3. Low Interest Rates
As we speak, interest rates are lower than they’ve ever been. If there was ever a time to purchase, it’s now. Just a decade ago, rates hovered between six and seven percent. Now you can get a 15- or 30-year fixed rate mortgage for well under five percent. This represents tens of thousands of dollars in savings over the course of the loan.
4. Freedom and Pride
Finally, you can’t forget about the intrinsic benefits of home ownership. Owning a home gives you a sense of freedom and pride. You’re no longer forced to ask permission from the landlord or hold off on making a change. If you want your kitchen painted a different color, go right ahead. If you want to plant a flowerbed next to the front porch, nobody can stop you. Being a homeowner gives you a sense of pride that’s rivaled by very few things.
Making Home Ownership Your Ultimate Goal
Homeownership should be a goal for nearly everyone. While some people will achieve it sooner than others, everyone should make it a priority. Pick up an extra job, save a few dollars per month, and pay attention to your credit history. By being fiscally responsible and ambitious, one day you’ll be able to grab your own piece of the American Dream.