Owning a home is part of the American dream. When you have your own place, you’re able to do what you want with it. You can settle in and start raising kids in a stable environment or have a comfortable place to return to after work each day. The benefits of homeownership extend beyond the psychological and emotional. Here are a few ways owning a home can help you financially, now and in the future.
You’ll Pay Less Each Month
For the most part, it’s less expensive to own a home than it is to rent a home. For example, in Vermont, the median monthly mortgage payment is $1,226 per month, compared to a median monthly rent of $1,500, according to Business Insider. In Nebraska, the median monthly mortgage is just $884, compared to a median monthly rent of $1,200.
You May Pay Less in Taxes
Owning your home comes with a set of tax breaks, meaning you might pay fewer income taxes than a person who continues to rent. The biggest tax benefits are being able to deduct the interest you pay on your mortgage and your property taxes from your income. You also get a break if the home increases in value and you end up selling it. You’re exempt from capital gains tax on the sale of the home, up to a certain amount.
You Can Tap into Your Home’s Equity
The longer you own a home and the more you pay down the mortgage, the more equity you’re likely to have in the property. Home equity is the value of the home minus any outstanding mortgage debt. So, if your home is worth $200,000 and you still owe $50,000 on the mortgage, you have equity worth $150,000.
Here’s the great thing: you can take out a home equity loan, borrowing against your home’s value, if you need money. People often use home equity loans to make repairs or to renovate their property. You can also use a home equity loan to borrow for your child’s education or to invest in other assets. Depending on the interest rate on the home equity loan, it might be less expensive than a traditional student loan.
You May Qualify for a Reverse Mortgage
Depending on your age and how much you have left to pay on the mortgage, you might qualify for a reverse mortgage. Reverse mortgages are available to homeowners over age 62, according to the FTC. You receive monthly payments based on the value of your home. Unlike a home equity loan, you don’t need to repay the amount until you move out or sell the home. A reverse mortgage can be an excellent supplement to retirement savings or Social Security income.
As you can see, it really is beneficial to own property, so start saving now to try and get on the property ladder sooner rather than later.