Everyone has the moment: do you go for owning your home or should you just continue renting? Owning versus renting has a lot of advantages, beyond just being a rite of passage into being a grown up. So what are some of these advantages? Here are the biggest ones and hopefully they can help move you to being a proud home owner.
Owning your home helps you build positive equity. Equity is what you get when you own more than you owe. Most young people, if they had to fill out a sheet listing all their assets, would only be able to list a bank account and maybe something like a car and some furnishings. Meager equity when stacked against things like student load debt or the car note that came with the new car. Owning your home gives you a big asset. Real estate also generally gains value over time. With some exceptions, that improvement in value means you have more equity in the property. When you are renting, you pay money each month and have nothing to show for it.
Another thing that makes owning versus renting make a difference in is your taxes. When you are renting, the payments you make aren’t payments you can deduct from your yearly income tax return. When you are a proud home owner there are several things that you can deduct. First is the interest you pay on the mortgage payments. You can also deduct the amount you pay for the real estate taxes you pay to the county or municipality where the property is located. It doesn’t sound like much, but the interest on a $200,000 mortgage can add up to several thousand dollars a year, depending on your interest rate. Even one as low as 4% can mean deducting $10,000 to $15,000! Real estate taxes can be sizeable as well, depending on where your home is located.
Another advantage – knowing exactly what your payments will be year to year. If you choose a fixed rate mortgage, which most people do, your mortgage payment will not change. The only thing that could affect it is changes in real estate taxes or homeowners insurance premiums since mortgage companies collect those bills in your monthly payment and then pay them for you.
An intangible advantage to home owning versus renting? Pride of ownership. That home is YOURS. You can decide to fix it up, change things and you don’t have to ask anyone’s permission to do it.