The Overlooked Financial Advantages of Homeownership
There are many clear financial benefits to owning a home: increasing equity, building net worth, growing appreciation, and more. If you’re a renter, it’s never too early to make a plan for how homeownership can propel you toward a stronger future. Here’s a dive into three often-overlooked financial benefits of homeownership and how preparing for them now can steer you in the direction of greater stability, savings, and predictability.
1. You Won’t Always Have a Monthly Housing Payment
According to a recent article by the National Association of Realtors (NAR):
“If you’ve been a lifelong renter, this may sound like a foreign concept, but believe it or not, one day you won’t have a monthly housing payment. Unlike renting, you will eventually pay off your mortgage and your monthly payments will be funding other (possibly more fun) things.”
As a homeowner, someday you can eliminate the monthly payment you make on your house. That’s a huge win and a big factor in how homeownership can drive stability and savings in your life. As soon as you buy a home, your monthly housing costs will begin to work for you as forced savings, coming in the form of equity. As you build equity and grow your net worth, you can continue to reinvest those savings into your future, maybe even by buying that next dream home. The possibilities are truly endless.
2. Homeownership Is a Tax Break
One thing people who have never owned a home don’t always think about are the tax advantages of homeownership. The same piece states:
“Both the interest and property tax portion of your mortgage is a tax deduction. As long as the balance of your mortgage is less than the total price of your home, the interest is 100% deductible on your tax return.”
Whether you’re living in your first home or your fifth, it’s a huge financial advantage to have some tax relief tied to the interest you pay each year. It’s one thing you definitely don’t get when you’re renting. Be sure to work with a tax professional to get the best possible benefits on your annual return.
3. Monthly Housing Costs Are Predictable
A third item noted in the article is how monthly costs become more predictable with homeownership:
“As a homeowner, your monthly costs are most likely based on a fixed-rate mortgage, which allows you to budget your finances over a long period of time, unlike the unpredictability of renting.”
With a mortgage, you can keep your monthly housing costs steady and predictable. Rental prices have been skyrocketing since 2012, and with today’s low mortgage rates, it’s a great time to get more for your money when purchasing a home. If you want to lock-in your monthly payment at a low rate and have a solid understanding of what you’re going to spend in your mortgage payment each month, buying a home may be your best bet.
If you’re ready to start feeling the benefits of stability, savings, and predictability that come with owning a home, let’s get together to determine if buying a home sooner rather than later is right for you.
Reasons to Fall in Love with Homeownership [INFOGRAPHIC]
- There are many benefits to love about homeownership, and they’re not all financial.
- Being a part of a neighborhood, driving academic achievement, and improving mental health are just a few of these advantages.
- Let’s get together today to determine if you’re ready to embrace the rewards of owning your own home.
When a House Becomes a Happy Home
We talk a lot about why it makes financial sense to buy a home, but more often than not we’re drawn to the emotional reasons for homeownership.
No matter the size or shape of a living space, the feeling of a home means different things to different people. Whether it’s a certain scent or a favorite chair, the feel-good connections to our own homes are typically more important to us than the financial ones. Here are some of the reasons why
1. Owning your home offers stability to start and raise a family
From the best neighborhoods to the top school districts, even those without children at the time of purchase may have this in the back of their minds as a major reason for choosing the location of the home they purchase.
2. There’s no place like home
Owning your own home offers not only safety and security, but also a comfortable place where you can simply relax and kick-back after a long day. Sometimes, that’s just what we need to feel re-charged and truly content.
3. You have more space for you and your family
Whether your family is expanding, an older family member is moving in, or you need to have a large backyard for your pets, you can take all this into consideration when buying your dream home, so the space truly works for you.
4. You have control over renovations, updates, and style
Looking to actually try one of those complicated wall treatments you saw on Pinterest? Tired of paying an additional pet deposit for your apartment building? Maybe you want to finally adopt that fur-baby puppy or kitten you’ve been hoping for. Who’s to say you can’t do all of these things in your own home?
Whether you’re a first-time homebuyer or a move-up buyer who wants to start a new chapter in your life, now is a great time to reflect on the intangible factors that make a house a happy home.
5,300 Reasons to Be Happy You’re a Homeowner
Studies have shown that, in many cases, the largest asset a family owns is the house they live in. Over the last twelve months, that asset has gained substantial value.
CoreLogic just released their 2019 3rd Quarter Homeowner Equity Insights Report. The report revealed that:
“U.S. homeowners with mortgages (roughly 64% of all properties) have seen their equity increase by a total of nearly $457 billion since the third quarter 2018, an increase of 5.1%, year over year.”
The equity in a property is determined by comparing the current value of the property against the outstanding mortgage debt. As prices rise, the equity in a home increases.
The report went on to explain that the average homeowner gain in equity over the last twelve months was $5,300.
Here’s a map showing the average equity gain by state:Since the housing crash in 2008, many homeowners have felt trapped in their current houses, as they didn’t have enough equity to sell. The gains in equity over the past few years may have freed some homeowners who have a desire to move.
If you’re curious about your home’s equity, let’s get together to do a market analysis on the current value of your house. You may be pleasantly surprised.
Expert Advice: 3 Benefits to Owning a Home
Success is something often worth repeating, and Brent Sutherland, a Certified Financial Planner and Real Estate Investor, has certainly made his way in a momentum-driving direction. Here are 3 tips he shares from a recent piece in Business Insider on the benefits of owning real estate:
1. Real estate diversifies your income
“While it is certainly important to be properly diversified with your investments, it is even more important to be diversified with your income. This is because the largest financial risk for most of you is the loss of your primary source of income, which is typically in the form of a day job.”
The article highlights how having multiple sources of income, such as those derived from real estate investments, can eventually lead to relying less and less on a day job. Sound dreamy? It can be. When done well, real estate investments may eventually open up your time and the financial freedom to explore other things, like travel and other aspirations you may have for the future, particularly in the golden years of retirement.
2. Real estate produces near-immediate results
“You can achieve and feel the results almost immediately. Property improvements are visible and tangible. You can cash, spend, and invest rent payments. Today! Not 30 years in the future.”
Currently, home prices are appreciating in all price ranges, and just last week CoreLogic announced their 12-month home value projection at 5.6%, an increase from 4.5% noted earlier this summer. With that in mind, real estate today is definitely driving immediate results!
3. Passive income can help you become financially independent sooner
“If you need $40,000 a year to live, you could alternatively invest in assets that generate an 8% cash-on-cash return. This is a very reasonable assumption. And it means you would only need to save a total of $500,000 (instead of $1 million). Yet, your investments would still meet your annual household living needs.
While returns, taxes, and inflation can, of course, affect your timeline, cash-flowing real-estate is a clear asset.”
Homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you’re contributing to your net worth by increasing the equity in your home, bringing you one step closer to true financial independence.
If you want to increase your savings and overall net worth, real estate is a great way to go. To learn how you can make it happen, let’s get together to discuss the process.
Who is Brent Sutherland?
Sutherland was 35 when he bought his first single home to rent out for income, less than five years later, he owns eight additional properties and part of a commercial real estate project.
The Cost of Renting vs. Buying a Home [INFOGRAPHIC]
- Historically, the choice between renting and buying a home has been a tough decision.
- Looking at the percentage of income needed to rent a median-priced home today (27.7%) vs. the percentage needed to buy a median-priced home (17.5%), the choice is clear.
- Every market is different. Before you renew your lease, find out if you can put your housing costs to work by buying a home this year.
Think Prices Have Skyrocketed? Look at Rents.
Much has been written about how residential real estate values have increased since the housing market started its recovery in 2012. However, little has been shared about what has taken place with residential rental prices. Let’s shed a little light on this subject.
In the most recent Apartment Rent Report, RentCafe explains how rents have continued to increase over the last twelve months because of a large demand and a limited supply.
“Continued interest in rental apartments and slowing construction keeps the national average rent on a strong upward trend.”
Zillow, in its latest Rent Index, agreed that rents are continuing on an “upward trend” across most of the country, and that the trend is accelerating:
“The median U.S. rent grew 2% year-over-year, to $1,595 per month. National rent growth is faster than a year ago, and while 46 of the 50 largest markets are showing deceleration in annual home value growth, annual rent growth is accelerating in 41 of the largest 50 markets.”
It is true that home prices have risen over the past seven years, increasing the cost of owning a home. However, the cost of renting a home has also increased over that same time period.
Homeowners Are Happy! Renters? Not So Much.
When people talk about homeownership and the American Dream, much of the conversation revolves around the financial benefits of owning a home. However, two recent studies show that the non-financial benefits might be even more valuable.
In a recent survey, Bank of America asked homeowners: “Does owning a home make you happier than renting?” 93% of the respondents answered yes, while only 7% said no. The survey also revealed:
- More than 80% said they wouldn’t go back to renting
- 88% agreed that buying a home is the “best decision they have ever made”
- 79% believed owning a home has changed them for the better
Those surveyed talked about the “emotional equity” that is built through homeownership. The study says more than half of current homeowners define a home as a place to make memories, compared to 42% who view a home as a financial investment. Besides building wealth, the survey also showed that homeownership enhances quality of life:
- 67% of current homeowners believed their relationships with family and loved ones have changed for the better since they bought a home
- 78% are satisfied with the quality of their social life
- 82% of homeowners said they were satisfied with the amount of time they spend on their hobbies and passions since purchasing a home
- 75% of homeowners pursued new hobbies after buying a home
Homeowners seem to be very happy.
Renters Tell a Different Story…
According to the latest Zillow Housing Aspirations Report, 45% of renters regret renting rather than buying — more than five times the share of homeowners (8%) who regret buying instead of renting. Here are the four major reasons people regret renting, according to the report:
- 52% regret not being able to build equity
- 52% regret not being able to customize or improve their rentals
- 50% regret that the rent is so high
- 49% regret that they lack private outdoor space
These two studies prove that renting is just not the same as owning.
There are both financial and non-financial benefits to homeownership. As good as the “financial equity” is, it doesn’t compare to the “emotional equity” gained through owning your own home.