Homeownership is a major financial and personal accomplishment. With housing prices and other expenses skyrocketing, however, it can be difficult for younger Americans to imagine themselves ever owning a home. Some people wonder if they should even try to make homeownership a reality.
Purchasing a home isn’t easy, but it is always a worthwhile goal. Homeownership offers a number of benefits that can improve your life both financially and personally. If you’re wondering whether homeownership is right for you, you should understand the important advantages it has to offer. Here are seven reasons homeownership will continue to be important in 2024 and beyond:
1. Wealth Building Potential
Owning a home is one of the most reliable ways to build wealth in the United States. When you rent, your monthly housing payment goes entirely to someone else. As a homeowner, your mortgage payments allow you to build equity in your home. Although some of your monthly payment is lost to taxes, interest, and insurance, the amount you pay toward the loan’s principal becomes your home equity. Your net worth can steadily increase month after month just from making your mortgage payments.
In most cases, houses increase in value over time as well. This creates even more potential for you to build wealth simply by staying put in your home. Once you pay off your mortgage, you have an asset worth hundreds of thousands of dollars, and you no longer have a monthly housing payment. This is one of the best ways to ensure your financial security in retirement and to build wealth that you can pass on to your children or other family members.
2. Home Equity Benefits
Home equity can be a powerful financial tool. You should always consult with a financial advisor before taking out a line of credit, but homeownership does give you more options for borrowing. If you have a substantial amount of equity in your home, you could use a home equity loan or a home equity line of credit (HELOC) to cover large or unexpected expenses. Another option is a cash-out refinance, which allows you to take out a new mortgage at a larger amount than you currently owe while receiving the difference in cash. There are benefits and drawbacks to borrowing against your home’s equity, but homeowners can have peace of mind knowing that their equity is a financial resource.
3. Consistent Payments
Owning a home is almost always a more stable situation than renting. When you rent your home, your payment is likely to increase every year. Many renters feel constantly anxious that their rent will go up so much that they can no longer afford to live in their home. Rent prices have been rising especially quickly in recent years, and many people have been forced to move as a result.
Your total monthly payment as a homeowner can change if your taxes or insurance rates increase. However, if you have a fixed-rate loan, your mortgage payment will remain the same. This allows you to plan for your financial future with greater confidence. Also, even as the value of a dollar changes with inflation, your mortgage payment will be stable. It’s highly likely that, in 20 or 30 years, your mortgage payment will be a smaller portion of your income than it is right now. While rent prices will rise alongside inflation, your mortgage will not.
4. Tax Benefits
Most homeownership tax breaks are only available if you itemize your deductions, so not all home buyers will experience tax benefits. Depending on your individual circumstances, though, you might save money in your first few years of homeownership by itemizing your deductions and taking advantage of the tax breaks.
For example, payments toward your mortgage interest are tax deductible. In your first couple years of homeownership, the majority of your mortgage payment will go toward interest. You could save hundreds or thousands of dollars on your taxes by claiming this deduction. You can also deduct property taxes and mortgage insurance costs.
5. Credit Building
Homeowners have a higher median credit score than non-homeowners. This doesn’t mean that purchasing a home will automatically increase your score, but it does give you a great opportunity to build your credit. Owning a home adds more diversity to your accounts, and making consistent monthly payments on your home will help you establish a strong credit history. Good credit helps you secure loans at lower interest rates, which can help you save even more money when borrowing.
6. Community
For many people, finding community is easier when owning a home than it is when renting. Renters tend to move more frequently than homeowners, which makes it difficult to build a life in one place. When you purchase a home, you probably plan to stay there for many years. This allows you to put down roots in your neighborhood, get to know your community members, and feel a stronger sense of belonging.
The mental and emotional benefits of feeling like you truly belong in your community can’t be overstated. Settling into your community is especially valuable when you have children. Your kids can stay in the same school system and get to know your neighbors. The stability has lasting benefits for your overall sense of well-being.
7. Your Home Is Your Own
When you own your home, you have far greater flexibility with how you decorate, renovate, and upgrade. You can customize each room in your house to perfectly match your personal style, and you can live your life however you want to. You don’t need to get permission from a landlord to paint the walls or to adopt a pet. As a homeowner, you make the rules for your own living space. The freedom of owning your own home can be incredibly exciting, especially if you were previously a renter.
Homeownership has huge financial and personal benefits, which is why it’s the ultimate goal for so many Americans. You shouldn’t rush into homeownership if you aren’t ready, but it should always be something you keep in mind for the future. Overall, homeowners have more stability, security, and peace of mind. To build a strong financial future, start taking steps today to work toward homeownership.