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The Financial Advantages of Being a Homeowner

Buying a home is one of the biggest financial investments any person will  make. Home ownership brings forth many financial advantages and when you weigh the differences between renting and buying a home, the choice will usually very clearly favor ownership. This is, true, however, only if you buy within your means and do not overextend yourself financially.

Some of the financial advantages to owning your own home are:

  • Tax savings and equity that can be used to pay for your children to go to college or tother uses
  • Mortgage interest is tax deductible whereas rent is not
  • Mortgage payments go towards building  future savings

When people rent, there is no financial return on that money other than the space it provided for the time period of the rental. One of the best financial reasons to buy a home is the tax savings that results from deducting mortgage interest and real estate property taxes. As you continue to make mortgage payments your home equity  will increase and your loan amount will decrease. If you are a homeowner, you are also able to itemize your deductions rather than just take the standard deductions. This is advantageous because the itemized deductions are generally much higher than the standard deductions.

As a home accumulates equity, that equity can later be borrowed against, and the home equity loan is usually lower terms with tax-free interest. Houses almost always appreciate over time, and any home improvements that are done to the home add to its overall value.

Home ownership also allows a person to build good credit. If in the past your credit has been blemished or less than perfect, owning a home and making regular payments will help you to rebuild a new credit history. Another advantage of being a first time home owner is financial stability and the fact that you know exactly how much your mortgage payment will be for at least the next 30 years!

Of course, the best time to buy is when the interest rates are low. Unfortunately there are many factors that contribute to the interest rates: market conditions, timing, points, credit, past payment history, debt to income ratio, loan to value, the type of property you are purchasing, if you plan to live in the dwelling,  if it will be a rental property, the amount of the loan, etc. Interest rates are a very important factor to consider when buying a home because they can truly make a very big difference in your monthly mortgage payment. If you finance $200,000 for 30 years with a 6% interest rate, your payments would be about $1,200 monthly. If you were to finance that same home for 30 years at a 4.73% interest rate, your payments would drop almost $200 each month. That is a considerable savings for most people. There are things that you can do to get a better interest rate, if you take the time to speak with a professional and do a little research.

The topic of home ownership has many factors to consider. If you are buying for the first time, you may want to do a lot of reading first to properly inform yourself. The advantages of home ownership are usually also far beyond financial gain. Homeowners are able to have the freedom to do whatever they want to do in their home without having to seek approval from landlords. This is where your “house” truly becomes your “home”!

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