Should I rent or should I buy? This can be one of the toughest decisions you make in your lifetime, and it may be a decision that you have to make more than once. Purchasing a home is a huge financial investment, one that you need to thoroughly research. While many people tout the advantages of renting, it is important not to overlook the upsides of home-ownership. Before you sign your name to a lease, consider these six benefits of owning a home.
1. Tax Deductions
The thought of April 15, Tax Day, makes most people groan. However, there are some significant tax deductions that homeowners can take advantage of that renters can’t.
Unlike rent payments, you can deduct interest from your mortgage payments on your federal income tax return and in some cases on your state taxes as well. Interest makes up a large portion of your mortgage payment during the first few years of home-ownership, which could amount to a nice deduction.
Additionally, some home-related expenses may be tax deductible including:
- Property taxes
- Mortgage points
- Mortgage insurance premiums
- Moving expenses, if you are an active military member
2. Building Credit
Are you trying to achieve that elusive 850 credit score, or at the very least trying to improve your score? Owning a home is a great way to build your credit. Your payment history accounts for a significant portion of your FICO score. Paying your monthly mortgage payments on time shows lenders that you are a responsible borrower and have a low risk of defaulting on your loan. The better your credit score, the easier it is to buy a car, get lower credit card interest rates or take out other loans.
3. Freedom to Decorate
One of the biggest benefits of owning a home is not having to ask for a landlord’s permission to make aesthetic changes to your home, such as installing white cabinets. When you purchase a house, you have the ability to truly make it a home that fits you. Go ahead and paint your guest bedroom Living Coral, Pantone’s Color of the Year. Use recessed lighting in your kitchen. Opt for quartz counters instead of granite. After your closing, you have the freedom create the house of your dreams.
When you purchase a new construction house, you can personalize your home from the beginning. In addition to offering structural options, like a downstairs den or an extended dining room, many homebuilders have design centers staffed with interior decorators. These professionals guide you through the design process. For example, they can help you match your kitchen backsplash and counter with the perfect paint color. With an interior decorator on your side, the vision for your home can become a reality.
4. Equity Builder
Every time you make your mortgage payment, a portion goes to paying off interest and a portion goes toward the principal of the loan. The amount of money paid toward the principal is considered your equity, or the percentage of your home that you own. As time goes on, your payments move from paying more interest to paying more of the principal. Also, the more your home increases in value the more equity you’ll have.
Consider your equity to be like another savings account. If needed, you can use the equity to borrow money for a second mortgage. Conversely, if you rent, your monthly payments don’t go towards anything nor can they be reinvested. It’s as if they vanish into thin air.
5. Stable Monthly Bills
With a fixed-rate mortgage, you have the same mortgage payment every month for the duration of the loan. In contrast, when you rent an apartment or house, you are at the mercy of the property owner who can raise rent when they see fit.
Owning a home also allows you some control of your utility bills. One of the benefits of building a new construction house is that they are often HERS-Certified, which stands for Home Energy Rated System. These houses combine energy-efficient appliances, lighting and construction to help you reduce your energy usage and ultimately save money.
6. Freedom to Have Pets
Many landlords have strict rules regarding pets, especially about dogs and cats. These rules often limit how many pets you can have, prohibit certain dog breeds and set a weight limit for your four-legged friends. Apartment complexes often also require pet deposits, which can sometimes cost up to $500. Depending on which state you live in, these deposits may be nonrefundable.
Some buildings even charge pet rent, according to the American Kennel Club. Pet rent is a monthly fee that individuals have to pay as long the pet lives in the rental. This can cost you up to an additional $35 a month.
When you own your house, you’re free to have a large breed like a Saint Bernard or three Siamese cats, or both, if you prefer.
There are numerous benefits to owning a home including the six mentioned above. Don’t overlook these advantages when you’re deciding on your next residence.