It seems like owning a home makes sense. You get to design, add, subtract, and make it anything you want it to be. But, does owning a home make cents? (see what we did there?) As it turns out, owning a home does make financial sense, especially in the long term. Check out these 7 financial benefits of owning a home.
- Owning a home builds wealth
When you own a home you will most likely gain some great equity in the home. One thing that was critical in the past – and is just as critical today – is buying a home you can afford. (see our mortgage affordability calculator to see what you can afford!)
- Equity builds monthly
Yes, owning a home builds long term wealth, but if you are in a home you can afford and you make payments on time, your equity – and therefore wealth, builds each month.
- Tax deduction
When you own a home you get to claim the mortgage tax deduction benefits. While the sum of this deduction can vary, who doesn’t love paying less in taxes?
- Tax deductions (part 2)
In addition to your mortgage interest, you can deduct the interest you pay on a home equity loan (or line of credit). This allows you to shift your credit card debts to your home equity loan, pay a lower interest rate than the horrendously exorbitant credit card interest rates, and get a deduction on the interest as well. Awesome!
- Capital gains exclusion
If you own a home and live in it for two or more years, you can qualify for this benefit. Basically, when you sell, you can keep profits up to $250,000 if you are single, or $500,000 if you are married, and not owe any capital gains taxes. Now, it may sound ridiculous that your house could be worth more than when you purchased it after these past several years of falling house prices. However, if you purchased your home any time prior to 2003, chances are it has appreciated in value and this tax benefit will come in very handy.
- A mortgage forces you to save
Sort of. By paying your mortgage each month and building equity you are basically saving money – in a roundabout way!
- Owning a home is cheaper than renting (long term)
For a few years, renting may be cheaper. However, over time owning a home becomes the much more fiscally wise move. You need to live somewhere, might as well be paying yourself rather than a landlord, right!? (check out our rent vs own calculator)