Buying a home is so much more than just having a place to live; many long-term benefits go along with it. While buying a home has many up-front costs and monthly payments, home ownership allows you to build wealth over time, benefiting you greatly down the road.
Let’s look at a few benefits of home ownership and how it can help you build wealth over time.
Home equity is the home’s current market value minus what you owe, and equity is something that accumulates over time. The longer you own the home, the higher your home value will get and the lower your loan will get (since it will be paid down over time). Your home equity will grow as monthly mortgage payments are made.
If you can pay off your home, meaning all mortgage payments are made, then you can live mortgage-free. Life without mortgage payments will free up money each month to help with other monthly expenses, reduce your overall cost of living, and help boost your retirement.
Home appreciation is the value of your home that will increase over time. Home appreciation depends on many factors, including location, economy, age of the home, real estate trends, and more. Choosing the right home in the right neighborhood will bolster the likelihood that your home appreciation will increase over time. The increase in home appreciation will add to your overall net worth and lead to a higher future resale value.
Mortgage Interest and Tax Deductions
Mortgage interest deductions allow homeowners to deduct any mortgage interest paid on mortgage debt from their taxable income. This will ultimately reduce the amount of taxes you will need to pay. In addition, the IRS offers other tax breaks to incentivize people to own homes and lower tax bills.
A few tax deductions offered are:
- Property Taxes: On income, sales, and property taxes up to $10,000 total (or $5,000 if married and filing separately)
- Discount Points: Purchased to lower your interest rate on your loan
- Necessary Home Improvements: These can qualify as tax deductions as long as they are necessary improvements
- Home Equity Loan Interest: Allows you to access your home equity and use it as collateral to borrow funds
We always recommend that you consult a qualified tax professional when it comes to your situation and how it relates to these tax deductions.
Owning a home is a beautiful thing, and it has many benefits for you and your family. If you have any questions regarding home ownership and how it can help build wealth, reach out to us! We would love to answer any questions you may have!