When considering purchasing a home, there are many financial questions that you need to ask yourself. Buying a home is a major financial commitment, and while there are pros and cons to homeownership, there are many positive financial benefits to owning your own home.
Homeownership comes several tax benefits that you will be able to reap. The most valuable benefit is that tax codes allow homeowners to deduct the mortgage interest from their tax obligations. For most homeowners this is a huge deduction since interest payments can be the largest part of your mortgage payments in the early years. In addition to your mortgage interest, you can deduct the interest you pay on your home equity loan. This tax benefit can allow you to shift credit card debts to your home equity loan allowing you to not only pay lower interest rates than your original credit card’s interest rate, but also get a deduction on the interest rate.
The greatest financial benefit of homeownership is that you are building wealth over time because you are building equity every month. Equity is the amount of money that you can sell your home for minus what you still owe on it. Through your monthly payments, the reduction of your home mortgage loan increases your home equity. As you build your home equity, you will eventually be able to use it as leverage to pay for other expenses in your life, as stated briefly above. Since home equity loan interest payments are tax deductible, for many homeowners, it makes sense to pay off other debt (bad debt, i.e., credit cards) with your home equity loan. You can typically borrow against your home’s equity for various reasons, including making home improvements, paying for education, covering medical bills, etc.
In the long term, buying will always be cheaper than renting (even in the worst housing market). Over time, as the interest portion of your home mortgage loan payment decreases, the interest you will be paying will eventually be lower than the rent you would have been paying. More importantly, you do not want to throw away money on rent into a landlord’s pocket, but instead find yourself putting in money and building equity in your own home.
The housing market continues to stabilize and financing is available for potential homebuyers. Many homebuyers cite that the financial benefit of owning versus renting is a main driver for their decision to purchase a home. If you have been on the fence about purchasing a home, it is time to contact a mortgage planner to help you understand your options and see the potential financial benefits.
You can trust Fairway Independent Mortgage to make your home loan as stress free as possible. Simply fill out an online application to start or give me a call to set an appointment to sit down and talk about your options!