The Financial Power of Home Ownership
For the vast majority of Americans, buying a home will be the largest purchase we make in our lifetime. While this is true, there are very few of us who are able to pay cash for a new home. Chances are, in order to buy a house, you are going to need to get a mortgage in order to afford it. With today’s home prices skyrocketing 15% above where they were at one year ago, this can seem like a scary proposition. However, the truth is that buying a home is not a financial burden, even if you need a mortgage to do so. Instead, buying a home is a way for you to build financial wealth. Why is that? The team at Peoples Choice Mortgage is here to go deeper into the decision to buy a house and break down the financial power of home ownership.
Why Buying a Home Buying a Home is a Boost to Your Financial Power
It might seem counterintuitive that taking on hundreds of thousands of dollars of debt in the form of a mortgage actually improves your financial situation, but it is true. Owning a home is a great way to give your wealth a jumpstart and getting a mortgage is the key to unlocking your financial future. In order to understand how and why buying a home is such a big financial boost it is necessary to look at the benefits homeownership provides and the costs it avoids.
Having a Mortgage Provides Financial Predictability
One reason why owning a home is such a financial boon is that it provides financial predictability. If you have a mortgage with a fixed interest rate then you know what your mortgage payment will be for the life of your mortgage. This is a huge benefit because it allows you to make an accurate long term financial budget. You can use this budget to allocate for additional types of investments to further build your financial wealth. Renting a house does not provide the same type of stability. Not only does renting mean that you cannot predict future payments, it most likely means that your budget will be increasingly taken up by housing. That data is pretty clear that rent payments are skyrocketing. Buying a house means that you can fix your housing costs for decades at a time. Even better, your mortgage payments benefit you and not your landlord.
Mortgage Payments are not Forever
If you are renting a home, then you will pay rent for the rest of your life. If you buy a home, then you will eventually stop having to make mortgage payments. Mortgage payments are not forever. They only last as long as the life of your loan. If you have a 15-year mortgage, then you only have to make mortgage payments for 15 years. If you have a 30-year home loan, then you only have to make payments for 30 years. These might seem like long periods of time, but there is no end to rent payments. Landlords do not give people homes or apartments rent-free. One day your mortgage payments will come to an end, and when they do, you will own an asset outright that might be worth hundreds of thousands of dollars. Depending on your real estate market and your house, maybe more!
Another reason why buying a home is a huge boost to your financial power is that you don’t have to wait until you’ve paid off your mortgage to see the benefits. As you pay off your mortgage, you build equity. Equity is the difference between the value of your home and the amount you owe on your mortgage. Equity is an asset. It is not just a paper asset, either. It has real value to you and your financial situation. You can use your equity to buy a bigger home. It can also be borrowed against for home renovations, which improves the value of your home. Your equity can also be used as a line of credit in the event you face some other type of financial hardship. Having equity in your house has tangible financial benefits and it accrues long before your mortgage is ever fully paid off.
Owning a Home Provides Tax Breaks
Owning a house and having a mortgage provides tax breaks that renting will never provide. When you buy a home you can get tax deductions for mortgage interest and property taxes. Any amount of money that you can save on your taxes is money that can go back into your budget for other things like savings or investments. You’re heard the old adage that a penny saved is a penny earned. These types of tax breaks are for much more than a penny. However, it is important to remember that the team at Peoples Choice Mortgage are not tax experts and this is not tax advice. We are mortgage professionals. Please consult a tax professional to learn the intricacies of what types of tax benefits you are open to from owning a home.
Final Thoughts
Taking out a mortgage to buy a house is not merely taking on a large debt. Rather, it is the building block to generating true financial wealth. While home prices make it seem like it is a big leap to buy a home in today’s real estate market, the truth is, it has rarely been more affordable. According to the National Association of Realtors, the percentage of income needed for mortgage payments has been decreasing dramatically. This is entirely due to today’s rock bottom mortgage rates. Unfortunately, this means that while owning a home is more affordable today, it will not necessarily be as affordable in the future. As mortgage rates start to increase, mortgage payments will take up a larger portion of your monthly budget.
What this means is that if you have been dreaming of buying a new home, do not delay. You should contact us today! The team at Peoples Choice Mortgage is here to walk you through the entire process and help make your dream a reality.
