More Than Just A Roof Over Your Head: Secret Advantages Of Homeownership
There are obvious benefits in buying a house.
Not least, you get somewhere to live.
But there are a number of other upsides that are slightly or considerably less apparent, and they aren’t all about money.
There are seven “hidden” benefits of owning a home that most renters are not yet aware of.
1. Buying A House Is Generally A Good Investment
The U.S. Census Bureau has a table of historical home values on its website that starts in 1940 and ends in 2000. It uses constant year-2000 dollars for all figures to account for inflation.
The Bureau indicates that housing prices increased the fastest (43 percent) during the 1970s and slowest (8.2 percent) in the 1980s.
The report shows that the median home price in 1940, adjusted for inflation, was $30,600. The same figure in 2000 was $119,600.
While some will say that investing in stocks has a higher payoff, there are other considerations.
Someone who invested $30,600 (the then median home price) in the stock market in 1940 might by 2000 be a millionaire today — assuming they survived a few crashes over the years.
But how many people in 1940 had $30,600 lying around to invest?
And how much would they have paid in rent over those six decades?
More recently, CoreLogic’s home price index showed a nationwide year-over-year change of +6.0 percent in August 2016. Not too shabby.
2. Homeownership Gets Easier Over Time
The first time, buying a house often involves financial strain. You have to come up with a down payment and cope with unexpected homeownership costs. You may feel the pinch for a few years.
But gradually things get easier for two reasons.
First, mortgage payments won’t increase with a fixed mortgage. And as you establish your career, those payments become more affordable. Meanwhile, tenants get rent raises to go with their higher salaries.
Also, paying your mortgage over time means you’re building equity each month. An asset you can sell or borrow against in the future.
3. Tax Breaks When You Need Them Most
Mortgage interest and certain closing costs are generally tax deductible (check with a pro about your individual situation). You get most of this relief during those early years when you’re paying the bulk of your mortgage interest.
Mortgage insurance and property taxes may also be deductible.
That applies to your federal taxes, and many states allow similar deductions.
Even better, when you sell your property, you can take up to $250,000 in profit, tax-free ($500,000 for couples filing jointly).
4. Suit Your Tastes, Not Your Landlord’s
You want a menagerie of pets? Does taste in decor run to lurid quantities of gold leaf?
Do you like walls painted in violent shades of purple? Or spend your weekends tearing apart engines or woodworking in your shop?
No problem. There’s no landlord to tell you those aren’t allowed. (But you may be wise to indulge future buyers by temporarily adopting more mainstream tastes when you sell.)
5. Improve Your Credit Score
Buying a house can improve your credit score, especially if you don’t have a long credit history or many installment accounts. That’s because your mortgage —provided it’s managed well — helps drive up your credit score in three ways:
- Consistent payments show you’re a responsible borrower
- Credit bureaus often give more weight to a mortgage payment history than to revolving accounts like credit cards
- Few landlords report rental payments, so your mortgage gives you an extra account on your credit report
6. Forced Savings: Wealth Accumulation
You can view the equity you build in your home as you make payments every month as a type of saving. Unlike renters, you’ve no choice but to increase your net worth.
The Harvard University Joint Center for Housing Studies confirms this. In fact, on of their studies showed that homeowners acquire 46 times as much net wealth as renters.
For every $1,000 accumulated by non-homeowners, those who own a home acquire $46,000.
Almost 60 percent of the wealth of homeowners is in the form of home equity.
Of course, renters are free to save too. However, for most folks who do not have portfolios of stocks, mutual funds and other investments, homeownership is the most reliable way to accumulate wealth.
7. You’ll Bake Better Apple Pies
Okay, that’s not true: you probably won’t bake better apple pies. But the National Association of Realtors (NAR) website links to studies and reports that make some pretty extraordinary claims for the benefits of homeownership, including:
- Better mental and physical health
- Improved community engagement
- Higher educational attainments for the children of homeowners
Of course, you have to choose to involve yourself in your neighborhood, and to support your children’s efforts.
Only you can decide on the validity of this seventh benefit of homeownership. But you may find the other six pretty compelling.
What Are Today’s Mortgage Rates?
If you’re considering buying a house, today’s low mortgage rates may help you take the plunge.
Check rates today to get started and see what you can afford.