Buying your first home requires gumption. You forgo splurging on Insta-worthy vacations to save for down payment. Then hesitate to turn those savings into stock in the latest plant-based startup your cousin is raving about. You fight every temptation in hopes of joining the glorious circle of homebuyers, and just before you pull the trigger, you stumble across an infographic that tells you renting is actually cheaper – is this fight even worth it?
The short answer is yes. We also have a long answer for you (that even touches on the perennial debate about owning or renting). Here are nine benefits of homeownership that make buying a home totally worth it:
Grow with a local community
When you buy a home, you're not just another renter going through the revolving door of a rental home. You're tied to one place, one community.
"When you buy a house, you get roots. You get to know a community, become part of that community and build a long-term relationship with a neighborhood, regardless of age or demographic," explains Christina Griffin, a leading real estate agent in Tampa, Florida, with 18 years of experience helping buyers find the perfect home.
Communities with high ownership-to-rent ratios have less crime, higher property values and better voter turnout. Neighbors band together through home-sharing groups and online networks like Nextdoor to organize everything from neighborhood watch to bike parades on 4. July. An 80-year Harvard study proves that a sense of community is essential to a long and healthy life – all the more reason to settle down and stay awhile.
Stabilize your monthly housing costs
Life is full of surprises – housing costs don't have to be one of them. When you buy a home, you're no longer threatened by landlord changes, lease terminations and rent increases – a curse that plagues city dwellers in particular.
While the national average rent has steadily increased by 11.3% since 2014, rents in expanding metropolitan areas have reached new heights. For example, rents in Griffin's home market of Tampa increased an average of 2.3% per year from 2018 to 2019, a 23% increase since 2014. In Stockton, California, home to some San Francisco super commuters, rents increased 28.4% from 2018 to 2019.
As a homeowner, your property taxes and home insurance can fluctuate, but you can control most of your monthly housing costs with a fixed-rate mortgage. For even more planning security, get a handle on your monthly utility costs with these energy-saving tactics:
- Replace old appliances with new energy-efficient models.
- Insulate your home with double-pane windows and door sills.
- Switch your garden to drought-resistant plantings.
- Switch your utilities to budget billing and set monthly utilities based on your average annual usage.
Paying a mortgage forces you to save money
Buying a home creates long-term wealth through "forced savings". Every time you make a mortgage payment, you pay off your debt and build equity in your home. You save automatically, as opposed to making a conscious effort to put money into your investment or savings account. When you reach the finish line of the mortgage marathon, you own an asset worth tens or hundreds of thousands of dollars.
Some economists argue that in today's housing market, you can theoretically save more money renting than buying a home. This viewpoint underscores that homeowners have more recurring expenses than renters (z. B. Property tax, mortgage interest, maintenance costs, homeowner's insurance, and homeowner's association or HOA dues).
Yet real-world data from the latest federal survey of consumer finances shows that the average homeowner has a net worth of 195.400 dollars has, compared to only 5.400 Dollars of the average tenant; that is 36 times more fortune. The difference between theory and practice? The discipline. For most Americans, forced saving is much easier than resisting the temptation to spend the excess money they would need to save or invest consistently to make renting a better deal.
Live mortgage-free and sail into retirement
The most important reason it pays to buy a home? When you pay off your house, you own an asset that you can also live in (not to mention sip champagne). Thirty-seven percent of households in the U.S. are outright owners, their residents mortgage-free. If you buy a home, you can save or spend the significant portion of your income that was previously spent on housing.
When you retire, this expendable sum becomes increasingly important as your income declines. With minimal housing costs (property taxes, utilities, property management, etc.) significantly increase your monthly spending budget – say aloha to an impromptu trip to Hawaii!
Even if the home you buy now isn't the one you'll take off from, you can still sell the house to fund your retirement. The average American has about twice as much equity in their home as they have saved for retirement. If you sell your home, you can liquidate your equity and use it to buy a smaller home or move to a less expensive state.
Take advantage of the tax benefits for homeowners
When people talk about tax benefits, they're still talking about taxes, so let's keep it short. Here are the top tax breaks for homeowners:
Tax deduction for mortgage interest
You can reduce the interest on a home loan by as much as 750.Deduct $000 for married couples, plus mortgage points if you bought them at closing.
Mortgage Tax Credit
Low-income households who obtained a qualified mortgage credit certificate (MCC) to purchase a home will receive a credit of 10% to 50% of the mortgage interest paid during the year.
Tax exclusion for home sales
When it's time to sell, you enjoy a capital gains tax break of 250.000 for single homeowners and 500.000 $ for married homeowners who file their tax returns jointly. You will have to pay taxes on profits above this threshold. You can find our full breakdown of the calculation here.
Implicit savings from imputed rent
Put on your thinking cap and pour yourself a double espresso. Homeowners in the U.S. benefit from the hidden imputed rent tax credit. It means the government doesn't tax the payments you put into your mortgage as a homeowner, as it would if those payments were through a renter. Check out Business Insider's breakdown of this tricky but brilliant concept.
Design your house to make you feel at home
Throw out your command hooks and nail the oil painting to the wall! The design of a home is one of the most entertaining aspects of home ownership (HGTV is, after all, the fourth most watched cable channel in the country…).
Enjoy the freedom to design each room according to your personal taste until you feel at home. Seventy-four percent of homeowners said they want to spend more time in their home after a remodel. Improving your interior design and appearance not only improves your lifestyle, but also has the potential to increase your home's value, making a messy DIY weekend totally worth it.
So paint the walls blue, convert a closet into a wine rack, install a mid-century mailbox. The world is your oyster.
Enjoy the convenience of greater privacy
Buying a house buys you privacy: no more nosy drive-by drivers or 24-hour notifications from your landlord. When the air conditioner runs hot, as it did in July, check with the service provider and make an appointment that best fits your schedule (probably with more urgency than a landlord would).
You can also enhance your privacy with physical additions to the home such as front yard fences, backyard fences, and smart landscaping; or you can add smart security systems like Ring that send alerts and live footage of the entrances to your home directly to your phone. You are in control of your family's privacy and convenience.
Say hello to your new sideline
Hang up your job at Uber and make your house your sideline. Make money from your spare rooms to pay off your debt or subsidize your mortgage.
For couples buying a home to grow into, the money you earn from the extra bedrooms can go toward the college fund of your future children for whom they are intended.
Hosts at Airbnb
Experience travel vicariously by hosting guests on Airbnb. On average, Airbnb hosts earn $924 per month; if high-priced outliers are taken into account, average earnings are still $440 per month.
Offer weekly and monthly discount rates to compete with hotels and short-term rentals, and charge a cleaning fee to freshen up the space between guests. There are more and more regulations that restrict Airbnb. So find out about local laws and property management rules before you post your offer.
Rent a room
If you prefer a longer-term roommate, rent your spare bedroom to a student or young professional. A recent analysis of data from the U.S. Census Bureau shows Americans would earn $6.2 billion a week renting out their spare bedrooms. You have to claim rent for income tax, but you can also deduct repairs like replacing carpets.
Split your mortgage with a duplex
Buying a duplex offers a balance between rental income and privacy – your tenants don't share your personal living space.
Griffin explains that duplexes are very popular in Tampa: "People like duplexes. They are sold at the moment at top prices. One family lives in one unit, the other is rented out and covers most of the mortgage payment."
Buying a duplex also teaches you the ropes of real estate investing. Learn the laws, test your landlord skills and convert your half to a second rental property when you're ready to move your family into a higher-end home.
Pride of ownership is profound
Buying their first home is a mega-success, a major life milestone, even the realization of the American dream. In a recent survey conducted by the National Association of Realtors, buyers cited the "desire to own their own home" as the top reason for buying a home. The majority of survey respondents indicate that citizens still consider homeownership part of their American dream (75% of non-homeowners and 90% of current homeowners agree with this statement). When you buy a house, you own land, you express greater independence – you are the master of your domain.
Consider the caveats before committing to a mortgage
Wealth and happiness through homeownership are by no means guaranteed. To make buying a home worthwhile, you must:
- You need to prepare your finances: Buying a home comes with a number of costs that are added to the down payment (ex. B.: realtor fees, home insurance, property taxes, maintenance costs, etc.). Calculate how much you should save with our guide for first-time buyers.
- Commit to a location: investing in real estate is a long-term play, not a short-term one. The return on a home investment increases significantly the longer it is held, as your equity grows and the home appreciates in value over time. If you're ready to move immediately for a new job, consider a rental property until you're settled in a particular area.
- Buy the right home: buying the wrong home can lead to regret or worse, foreclosure. Work with a top-notch real estate agent to help you find the right home for your needs (and negotiate the best deal for your wallet).
- Resist refinancing for the wrong reasons: Just because you can tap into your equity doesn't mean you should. Avoid refinancing your home to pay off debt or buy consumer goods that don't increase the value of your property. Refinancing your home comes at the expense of your forced savings and often costs more than the promised lower interest rate is worth.
When you're ready, buying a home is worth it
Buying a home is a big commitment, but the financial and lifestyle benefits are worth the cost. Real estate is not the only investment out there, but it is certainly one of the most rewarding. After all, buying a home is about more than just buying a home – it's about settling into a home.