While it might seem like a logical next step for those who are already all-in on the idea of owning a home, the truth is that sometimes you might not notice all of the benefits unless they’re laid out there in front of you. Here, we’re going to look at what homeownership can really mean for your budget, and why it might be an even more financially sound move that you have considered before.
The Cost vs. Renting
When it comes to buying a home, most of the financial barriers of buying reside up-front. From the downpayment on the home to the fees and costs of conveyancing, it can be a sizeable expense and it’s important to budget for it at the beginning. However, when it comes to the long-term costs, paying off a home loan is almost always cheaper than renting in the same area. There are exceptions to this, depending on where you live. However, if you can get past the goal of making those initial investments, then it can actually free up more cash that you can put towards savings and other long-term financial goals.
The Investment Potential
Let’s not forget that real estate is often one of the first options considered when you’re looking at investment options. Most people who are buying a house are not doing it from an investment standpoint, but it still brings that benefit all the same. Depending on where you buy your home, you’re going to be building wealth over time if the prices continue to go up as they have been on average. Of course, you can take steps to increase the resale value of your home, such as investing in renovations or installing more environmentally-friendly features and fixtures. Often, making a good investment out of a property means taking steps to fight the depreciation of the structure, itself, while the land appreciates in value.
Equity Is a Useful Asset
A lot of homeowners are left in the dark about what equity is. To put it simply, it’s the difference between the value of the home and how much you owe on the mortgage. It’s effectively how much you have already paid into it. Equity does take time, but it can be a useful financial asset in a range of ways. For instance, you can release equity by remortgaging your home to give you cash for a range of purposes. As the value of the home increases, while you are paying your equity, you are also making savings, since that appreciation is the added value that you’re getting beyond the price that you initially paid over it. Of course, care must be taken with any loans that put your property on the line as it is a significant asset to use as collateral.
Put Your Savings in an Asset
While you’re paying off a mortgage, you can think of it as effectively putting savings into a physical asset. You typically get a decent return, as explained before, due to the appreciation of the land. However, this isn’t just useful as a means of investing in property. It also means that you have assets to rely on should you find yourself in financial hot water. Releasing equity and getting a loan based on your home is one option but there are also companies that buy houses that you can rely on when you need a sizeable amount of cash. The ability to sell homes and free equity rather quickly nowadays also makes it easier to not be “tied down” by your property.
Tax and Expense Deductions
There are a host of mortgage, tax, and expense deductions that you can benefit from if you own a home. If you live in a place with a mortgage deduction, you can deduct the interest on your home loan directly from your taxes. There are some closing costs you can deduct to help make it easier to initially buy that home, too. What’s more, property tax is deductible. You can also deduct the interest that you pay if you open up a line of credit on your home equity. This is just another way that building equity can be a huge financial bonus to any homeowner that’s willing to use it.
There are, of course, differences in these benefits depending on where you live. However, for the majority of people considering renting or homeownership, it’s almost always more financially advantageous to buy a house. Consider the benefits above and whether or not they might be something you could make use of.