Equity is a key benefit of homeownership. Individuals who purchase their homes often pay less over time compared to those who continuously rent their homes. That's because homeowners are building equity in the property they own. The interest paid on the home decreases the more individuals pay down their mortgages. Thus, individuals who invest in the right home with affordable mortgage rates can leverage long-term cost savings of owning a home compared to renting one over time.
However, renters do not build equity in the home since they don't own the property. Because homes typically appreciate over time, building equity becomes a huge advantage for homeowners when they want to sell the home. Homeowners can cash in on the sale of their home and its appreciated value to make a large profit once the home sells.
Homeownership is also an avenue to achieving long-term wealth. In fact, studies show that homeownership is a critical driver in wealth building and accounted for 25 percent of the assets for American households in 2016. The effects of wealth building provide opportunities for new income and savings opportunities. For instance, homeowners can become landlords and earn income from renting out spaces or units on their property or the entire house. This allows homeowners to have more money to invest in their retirement, stocks, businesses or other investments or financial goals that are important to them. Homeownership also helps contribute to long-term wealth that homeowners can pass down to their family members.
The tax advantages homeowners get for owning their homes also make it worthwhile to invest in a home. For instance, homeowners can deduct the interest they pay on the mortgage of their home for qualified loans valued up to $750,000 starting in the 2018 tax year until 2026. Homeowners may also deduct up to $10,000 in property taxes off their federal taxes. These home-related tax deductions help lower a homeowner's tax liability, which proves beneficial for investing in other areas that help build wealth.
The path to wealth often involves owning real estate, and homeownership offers the advantage of driving wealth. But by making smart financial decisions such as finding mortgages with affordable interest rates, individuals get the home they desire and start building long-term wealth.
Find the right mortgage by speaking with Mortgage Loan Advisor.