Owning a home is a worthwhile investment that builds your wealth, instead of building your landlord’s wealth. Every mortgage payment is your opportunity to grow your wealth. In today’s market, breaking free from renting is much more attainable than one may think.
Transitioning to ownership can be a positive move for creating wealth and balance. Here are four valuable reasons why:
1. Grow Your Equity
What is equity? Equity is the balance between what your home is worth and your loan payoff. Monthly payments of principal, interest, and escrow are amortized and the principal reduces your loan balance. By renting, your landlord gains the benefit of a principal payment and equity gains. Equity gains have soared over the past six years to an average of $17,000 per homeowner, as reported by CoreLogic.
2. Benefit from Tax Breaks
Homeowners reap the benefits of the mortgage interest deduction. Interest paid in your monthly mortgage payment can be one of your biggest write-offs when filing your tax returns if itemizing deductions. Consult with your tax advisor on current IRS rules & regulations of home mortgage interest deduction.
3. Establish Financial Stability
A common guideline for how much a buyer should spend on a monthly mortgage payment is no more than 28% of their monthly gross income. Budgeting for a home is determined by four factors:
- Debt & Expenses
- Credit Scoring
- Cash on Hand
With a fixed mortgage rate, your monthly mortgage payment is locked in. Rent payments are subject to change at your landlord’s discretion. The average rent increase is 3% to 5% per year which could make a significant impact on your monthly budget.
4. Own Your Independence
‘Your home is your castle’ is probably the truest statement when you consider the freedom of owning your home. Freedom from the rules and regulations of a lease or waiting for the landlord to fix an on-going issue. No longer does it matter if you paint the walls purple or hang a picture with a nail rather than a command strip. You are in the driver’s seat!
Remember the importance of maintaining your investment. A good rule of thumb is to budget 1% of the purchase price for yearly maintenance costs. Also consider home improvements made, such as updated kitchen or baths, are an investment on your return when selling.
If you are ready to take the next steps to homeownership, we recommend that you don’t go at it alone. Having your representation to guide you through one of the most notable life events is a smart decision.