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Home Buying Articles

Advantages of Homeownership


Is owning a home right for you?

Becoming a homeowner comes with a lot of responsibility, but also a lot of rewards. To help you decide if owning a home makes the most sense for you, here are some of the main reasons people choose homeownership over renting.

It’s a Good Investment

While home prices move in cycles over the short-term, if you stay in your home for a long time, it could increase in value and give you a substantial return on your investment.

If you are currently renting a home or apartment, use our Rent vs Buy Calculator to help determine which option provides the most economic benefits for you over the time you plan to be in your residence. When using the calculator, be sure to include some assumption about future increases in your rent, as most landlords periodically raise rents.

You Build Equity

When you subtract the amount you owe on your home loan from the total value of your house, the amount left over is your home equity-the “dollar” value of your home that actually belongs to you. There are two ways to build equity:

  1. With each monthly mortgage payment you make, a portion goes toward reducing the amount you owe on your loan, which increases your equity. In a sense, paying your mortgage is a form of savings, as it increases the equity in your home.
  2. As your home increases in the value, it creates more equity for you

In a sense, paying your mortgage is a form of savings, since it increases your home equity which you can tap into if you need money in the future.

When necessary, you can borrow against your home equity to meet a variety of financial needs, including home improvements, education or medical expenses. A home equity loan or line of credit can also be used to pay off high interest credit card debt, since the interest rate is generally lower and the interest payments are tax deductible. Read our Cash Out Refinance article for more information on how you can one day access the equity that you build in your home.

You Enjoy Significant Tax Deductions

Owning a home can reduce the amount you pay in income taxes each year. Your mortgage interest and property tax payments may be deductible from your federal taxes, as well as many state taxes. Certain closing costs and loan discount points also may be tax deductible1. In the early years of your mortgage, when interest represents the bulk of your monthly mortgage payment, these tax deductions can put a significant amount of money back in your pocket.

You Build a Strong Credit History

When you buy a home and consistently make your monthly loan payments on time, it demonstrates to other lenders that you are a good borrower and the risk of you defaulting on a loan is low. This strong credit history will be helpful in the future when you need other loans for buying a car, making improvements to your home, or paying other major expenses.

You’re Free to Create the Home You Want

Homeownership offers tremendous freedom to create the living environment that you have always wanted. You can own pets, paint rooms whatever color you like, make changes to floors and carpeting and do all the things that make a house your home – all without having to get approval from a landlord.

1 Consult your tax advisor about the tax deductibility of mortgage interest.

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