Homeownership can sometimes become a challenge due to unexpected events or predatory mortgage terms.
Wiring fails, pipes burst, termites devour your structure, foundations crack – the list just goes on and on. Regardless of the money, effort, and time you invest in it, the situation seems to get worse.
Homes undoubtedly cost tons of money and require a lot of upkeep. However, is owning a home nothing but a leech on finances? Of course not! If it was, no financially-sane person would be a homeowner.
Despite the costs, homeownership can financially benefit you. Each individual homeowner, though, must decide whether the benefits outweigh the associated expenses.
With that said, the following are 9 financial benefits of owning a home:
1. It can become a source of passive income.
Your home can become a profitable investment if you choose a solid home and make cost-effective changes.
For instance, your home could become a sizable nest egg through a buildup of equity or rising home costs.
You could sell the home for a cash payout when you no longer owe on the mortgage. Alternatively, you could earn passive income by renting out the property.
2. You can enjoy tax breaks.
One of the biggest incentives for homeownership is tax breaks. For example, interest incurred on home-improvement loans are tax-deductible. This interest is usually capped at about $100,000.
Similarly, taxes on the property are tax-deductible as well. Home-improvement changes geared towards making your home energy-efficient could also give you a tax credit of up to $50. Examples of such home-improvement changes include installing storm doors and new windows.
3. Encourages you to have a sizable emergency fund.
You’ll learn quickly how to protect your finances as a homeowner once you decide to buy a home.
A sizable emergency fund will help you take care of unforeseen issues with your home. This way, you will be able to properly maintain your home and protect it as an investment.
With a sizable emergency fund for your home, you’ll be able to keep yourself from acquiring repair cost debt. Additionally, you can always fall back on the emergency fund account for other emergencies if you end up not needing the emergency fund for your home.
4. It can lower your car insurance payments.
As a homeowner, you can get special discounts or lower rates from many car insurance companies. Although the reduced monthly payments for car insurance aren’t a reason to own a home, it’s certainly a financial benefit.
5. Owning a home aids in getting loans.
Homeownership can help you get approved for a loan if your mortgage has a reasonable income and debt ratio. You could become qualified for better loan opportunities with great credit cards and lower interest rates once you’ve proven credit-worthiness.
Another perk for owning a home is the potential to get a loan on home equity.
6. Homeownership improves your credit score.
You can improve your credit score by becoming a homeowner. You can create a reliable payment history with which to prove your credit-worthiness by making your monthly mortgage payments on time.
As your credit-worthiness improves, you could save even more money by refinancing for a lower interest rate on your home.
7. Fixed monthly payments.
As a homeowner, fixed-rate mortgages will give you the financial stability not afforded to all tenants. Tenants can face unexpected increases in housing cost. But as a homeowner, you can enjoy the benefits of a fixed-rate mortgage, particularly if you lock into a mortgage rate with a low-interest rate.
It may help stabilize your budget and your finances knowing that you won’t be facing a jump in your housing costs.
8. Homeownership is an investment.
Unlike renters who see no return on that monthly expense, your housing payment is an investment. Each monthly payment contributes to the principal.
When buying a home, you need to take every factor into consideration. This will help your house become an investment rather than a money drain.
9. Cost saving choices.
Aging, energy-inefficient appliances can take a huge toll on your utility bills. Particularly dishwashers, washing machines, water heaters, and older toilets use way more water than needed and can really increase your utility bills.
For a renter who is unhappy with energy-inefficient appliances, their only option is to request the landlord for the upgrades or move to a new place if the landlord declines their request. But as a homeowner, you get to decide on the kind of appliance that you want in your home.
By opting for energy-efficient appliances, you’ll be able to save a lot of money on your bills annually.
With all these benefits, it’s quite evident that homeownership isn’t a money-sucking black-hole of finances. In fact, it’s quite the opposite. It’s the path to wealth and financial freedom.
Thank you to Marina Gorbounov at Evolve Property Management in Denver for submission of this article.