Home ownership is the greatest American Dream, is it not? Even in this era of record foreclosures, the percentage of U.S. households that now own, rather than rent, is an all time high. It’s not a surprise given several benefits of homeownership.
Rent vs. Buy
No Matter what you are currently paying for rent, your total cash outlay over a period of several years will probably add up to a much higher total than you may have realized. Compare a renter who pays $1800/month with 5% increase in rent every year and a homeowner who buys a $500,000 home and the home appreciates at 5% every year.
In the above example a renter ends up paying ~$120,000 in rents over a 5 year period while a homeowner ends up building ~$140,000 in equity. These numbers may or may not be true in all real life scenarios, but it gives you an idea.
When you are figuring out how much you can afford to commit to monthly mortgage payments, do not forget about the tax benefits. The US government allows tax incentives that make it possible for many homeowners to exceed the standard yearly deduction. The following three components of your home mortgage are tax deductible:
- Interest on your home mortgage.
- Property taxes.
- Loan points for a purchase mortgage
Homeowners Have More Stability
Owners typically stay in their home 12 years whereas renters stay no more than 3 years. Remaining in one neighborhood for several years lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.
Appreciation of Property
As home prices have fallen precipitously in today’s tough economy, the basis for realizing appreciation in future years is very strong. Historically, even with other periods of declining value, home prices have exceeded consumer inflation. From 1972 through 2005, home prices increased on average 6.5%, according to the National Association of Realtors.
The monthly payment helps in repayment of the principal amount, thereby increasing the equity of the house. Also when you sell you can generally take up to $250,000 ($500,000 for married couple) as gain without owing any federal income tax.
Increased Net Worth
Few things have a greater impact on net worth than owning a home. In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was just $4,000 compared to homeowners at $184,400.
Positive Environments for Families
Children of homeowners are 59% more likely to become homeowners. Their children are also 25% more likely to graduate from high school and 16% more likely to graduate from college.
Having a place you can call your own
There can be no other benefit that can beat the emotional satisfaction of home ownership. Whether it’s having the nicest lawn on the block or having your own backyard and garage or being able to color the walls the way you want, is so much more fun than renting.
Special $8000 Federal Tax credit
And for a limited period of time, you can also get $8000 in Federal Tax credit if you are a First-Time home buyer.
If you are considering buying a house and would like someone to help you navigate through the process. Contact me for a complimentary session. You may also consider buying my book First Time Home Buying 101 which gives a step-by-step guide to homeownership.
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