“The ache for home lives in all of us, the safe place where we can go as we are and not be questioned.” — Maya Angelou
Truer words have rarely been spoken about one of the most intangible benefits of homeownership; your home is yours, and yours alone. It is impossible to place a value on that feeling.
It is, however, possible to place a very precise value on the financial benefits of homeownership.
Let’s break down the financial benefits of being a homeowner:
- The single biggest financial benefit to homeownership resides in the US tax code which allows you to deduct mortgage interest and property taxes. Many buyers realize significant savings through this deduction, as interest and taxes can be a large component of your mortgage payment.
- A bonus to the interest deduction is the ability to deduct the interest on a home equity line of credit (HELOC). You can shift other debt (car loans, credit card debt, etc) to a low-interest rate HELOC, and then deduct the interest portion of your payment on your taxes. Rearrange your credit to see these savvy savings.
- When you sell your home, capital gains are tax-free, up to $250,000 (or $500,000 if married).
- Homeownership has proven, over time, to be a huge driver of wealth in the United States. The ability to build long-term equity in your home (and then borrow against it when needed and still write that interest off – see #2 above) remains unequivocally one of the single biggest sources of wealth building and passive income in the US.
- Paying a mortgage equates to forced savings. Each time you make a mortgage payment, a portion of that is paying down the principal balance on your loan and building equity in your investment. Renting offers the potential for comparable wealth building but a tenant would have to invest a similar amount as the portion of his mortgage payment that is going towards principal on a monthly basis. Rarely does a renter do that and thus, over time, homeowners accumulate far greater wealth.
- Your housing payment is largely fixed over time. Your total monthly payment is based on the principal and interest on your loan, along with your property taxes and homeowner’s insurance (often referred to as PITI for short). The lion’s share of your payment is principal and interest on your mortgage and so long as you locked in a fixed rate mortgage, that number will never change. Taxes and insurance can vary but most jurisdictions have a homestead program that caps tax increases and insurance costs (flood insurance notwithstanding) tend to rise with inflation.
Homeownership is not without an occasional headache, and there is certainly no guarantee of wealth growth. There are, however, certain financial benefits available exclusively to homeowners.
Let’s meet and see if homeownership can help you meet your long-term financial goals.
The Stokes Group is a team of dedicated professionals who have passion for the real estate business and will advocate for our clients with the utmost honesty, integrity,