Contrary to popular belief, owning a home has a lot of advantages. People believe owning a home will increase expenditures and will require a lot of attention, but the benefits outweigh the costs. If you wish to learn more about them, read on.
When you buy your own home, your mortgage will eventually decrease while the property value increases. This is why you should consider purchasing a home instead. Many people make the mistake of misunderstanding a home and its value as an asset. It can be a profitable investment that will eventually pay off for itself. But just like any other investment, you will need to review it regularly. Moreover, you also have to maintain it well so you can sell it for a good price when the time comes. So, in reality, you have the opportunity to build your personal wealth as long as you play your cards right.
When you are making your monthly mortgage payments, out of necessity you will need to create a forced savings account. So in five years’ time, with an $1800 monthly payment, you will have eventually paid $29,331 on the principal amount of the mortgage. In reality, this money would be yours if you ever choose to sell your home.
One of the best things about owning a home is you can benefit from tax deductions and savings. Under section 163 of the IRS code, if you decide to improve or construct using a loan, the interest is deductible on up to $100,000 mortgage value. So, interest on all loans tied to real estate is deductible as well as the mortgage itself, up to $100,000. For example, if you make $100,000 a year and pay $1,800 per month as rent, your entire income would be taxable. But if you purchase a home with a monthly payment of the same amount, you only have to pay taxes on approximately $75,000 of your annual income.
Owning a home for an extended period of time will be more profitable than renting. However, this is only possible with an excellent plan and proper execution. You can cut down on the costs of homeownership and maximize the ability to save and create real wealth for yourself. Keeping this in mind, you will come across various small businesses which have home offices used for tax deductions even though they are earning an income. Or, you could consider renting out a bedroom so you can pay off your mortgage faster and build equity.
So, as you can see, there are numerous financial benefits of owning a home. In other words, it makes sound financial sense to consider the option.