The Financial Benefits of Homeownership

Even in a hot market, buying a home is still a better long term financial decision than renting. Don't believe me? Consider this: According to the 2020 Survey of Consumer Finances from the Federal Reserve, homeowners have a net worth forty times greater than that of someone who rents. That's a pretty compelling number. And that net worth isn't coming from just the value of the home. Here are just a few of the ways owning a home pays off in the long run:

Forced Savings

Every time you make a mortgage payment, a portion of that payment goes towards building equity in your home. In addition to providing you and your family with a place to live, you are saving money month after month. When you add that to the amount you put towards the down payment, you will find that you quickly have a sizable amount of equity in your home, which you can access through the sale of your home, or through a refinance or home equity line of credit.

Home Value Appreciation

Though there are inevitable market fluctuations, the long-term trend in prices has always been upward. Staying on top of maintenance and periodically updating your home are great ways to add even more value and appreciation.

Fixed Interest Rates

One of the benefits of a mortgage is the fixed nature of the payment. Though the payment may seem large in the first few years of home ownership, those payments will seem like quite a bargain several years from now. While rents will continue to rise with the cost of living and inflation, your mortgage will stay mostly the same.

Tax Advantages

Mortgage interest - along with property taxes and some improvements - can provide significant tax savings. You'll save even more if you're working from home in a dedicated work space, something most people are doing in the current COVID environment.

Intergenerational Wealth

Owning a home can someday provide significant wealth to your heirs. There are also tax sheltering benefits available to your heirs, should they decide to sell the home after an inheritance. Since the home would be taxed at their fair market value, heirs will not have to pay capital gains on the property's appreciation. 

Some people may be feeling reluctant to jump into the housing market after so many years of positive gains. There's no way to predict exactly how much the market will go up - or even down - for any specific year. But think of it like this... it's like riding the elevator to the top of a tall building. You may not shoot right to the top, it may go down a floor before going back up again, but you will eventually continue to rise to the top. It's time you took that first step towards building wealth.