Homeownership is a powerful wealth-building tool. In addition to boosting household wealth, it also creates strong communities. But some critics of homeownership say it contributed to the housing crisis by promoting bad lending and financial sector excesses. That’s a mistake. It’s time to reconsider the power of homeownership.
There’s no denying that buying a home is one of the largest financial decisions that most people will make in their lifetime. It takes a significant amount of financial success to get to the point where you’re ready to take on a mortgage, and many benefits of homeownership make it well worth the investment for those who do.
For starters, when you own your home, you can upgrade or modify it to suit your needs. This gives you a sense of control over your living situation that doesn’t exist when renting. Homeowners are also more likely to maintain their homes and yards, resulting in higher property values and a better impression on their communities. In addition, research has shown that families who own their homes tend to have higher educational and economic achievement rates than those who rent.
Another perk of homeownership is that you build equity in your property over time, providing a great source of emergency funds if necessary. By contrast, rent payments don’t result in any tangible assets.
Sense of Belonging
Unlike other tangible assets that can depreciate, homeownership provides an emotional connection to a place where memories are made. For many, this makes homeownership the ultimate symbol of achievement. Buying homes for sale in Hartselle, AL, is an opportunity to make a home you will enjoy for years, even after passing it on to your children.
It is also a way to feel rooted in your community, a sense of belonging that can increase happiness and well-being. Studies show homeowners have a stronger sense of social capital, self-esteem and satisfaction than renters. In addition, neighborhoods where homeowners dominate often, have lower crime rates than those where most housing is a rental property.
When deciding to buy homes, it is important to consider factors beyond interest rates. While they play a key role in mortgage affordability, it is crucial to take a holistic approach that evaluates the long-term benefits and satisfaction of owning your home. By considering the emotional impact of homeownership and how it can contribute to a happier, more fulfilling life, you can decide whether buying a home is right for you.
Although owning a home has costs, such as a down payment and mortgage payments, it also provides various tax benefits that can add to significant savings at tax time. The IRS allows homeowners to write off mortgage interest, property taxes and insurance expenses, and other credits that may be available based on where they live.
In addition, homeownership allows families to build home equity that acts as a long-term savings vehicle and a source of financial security when needed. Despite a persistent wealth gap between white, black, and Hispanic families, research shows that homeownership is one of the best ways for these families to accumulate assets to help them overcome economic setbacks.
Renters need access to this level of tax relief. For instance, a landlord cannot deduct the cost of renovating a tenant’s apartment or hiring someone to maintain the property. And if a tenant cannot pay their rent, the landlord can raise it or evict them.
Those who have yet to purchase their homes are often surprised to learn that the expense of buying houses is tax-deductible. But this critical benefit can help buyers save hundreds at tax time. Remember that only homeowners can claim this deduction; the amount you qualify for depends on whether you itemize or use a standard deduction.
Homeownership represents an investment up front but is also a powerful vehicle for building wealth over time. Homeowners build equity in their homes largely through their down payment, mortgage payments and property value appreciation. But they can also leverage their home equity to accomplish financial goals or make a major renovation if needed.
Home equity differs between a property’s market value and outstanding mortgage balance. Generally, homeowners build equity by paying their mortgage principal regularly and as property values increase.
The most obvious way to build equity in a home is to pay off the mortgage, but you can also speed up your loan repayment by making a larger down payment at purchase or opting for biweekly payments. You can also access your equity through a cash-out refinance, though lenders typically limit how much you can borrow against your home’s equity.
Access to a reserve of home equity can reduce a family’s reliance on public assistance if they experience a job loss or other hardship. It can also provide the funds needed to cover a major renovation or consolidate debt with a low-interest loan.