Credit Sesame discusses reasons to own your own home.
Mortgage interest rates have risen lately, and home prices continue to escalate. But that doesn’t mean that purchasing and owning a home isn’t a good idea. If you are financially ready and enjoy good job stability, now could be the perfect time to claim a home and reap all the perks of homeownership.
Take the time to weigh the pros and cons of owning a home, especially compared to renting. Even with higher prices and interest rates, you’ll likely determine that having a home of your own is worth it in the long run.
Why now is a good time to purchase a home if you’re ready
Yes, it’s getting more expensive to buy and keep a home. And demand continues to outweigh supply, which means there’s still a lot of competition and bidding wars for available homes for sale.
But owning a home can pay off long-term if you can afford to purchase.
“If you are in a good place financially, feel secure in your job, and have money saved for a down payment and closing costs, you are in a good spot to consider homeownership right now,” says Shane Sutherland, mortgage loan originator for Silverton Mortgage in Atlanta. “Historically speaking, mortgage interest rates are still relatively low, despite recent rate hikes. And while home prices are high, potential buyers have an array of mortgage loan options to choose from today.”
Consider, too, that rent prices have gone through the roof in many markets, often exceeding the cost of buying and owning a home in some areas. You’re going to have to live somewhere – why not make it a place that you can call your own and use to build long-term wealth?
Good candidates for buying and owning a home
According to Jason Gelios, a southeastern Michigan Realtor, the ideal homeowner candidate is anyone looking to have a reliable and protectable place to live while possibly earning a great return on their investment.
“This could also be someone looking for a stable environment with an emphasis on community,” he says.
Ideally, you should have a good credit score (700 or better), a debt-to-income ratio of 50% or less (meaning 50% or less of your income goes toward debt), and a positive credit history of paying bills consistently on time. Better credit will get you a better mortgage loan deal with a lower interest rate.
“It’s also important to have steady employment. Your lender will ask to see your paystubs and W-2 or tax return documents to show that your income is reliable,” adds Sutherland.
Top reasons to own your own home
Buying and owning a home has its rewards and risks. But the experts agree that, for well-qualified and financially ready buyers, the pros outweigh the cons. Here are several compelling reasons why being a homeowner is a smart move.
1. Build equity
The US Census Bureau indicates that one of the most significant contributors to long-term wealth is homeownership. In fact, wealth inequality between homeowners and renters is quite substantial – with homeowners’ median net worth being 80 times larger than renters’ median net worth.
“That’s because, when you own a home and pay a mortgage, you are building equity in two ways – by paying down your mortgage loan over time and through your home’s value appreciation,” explains Sutherland. “Each time you make a mortgage payment, it slowly builds equity.”
Additionally, real estate values tend to increase over time. So as you pay down your mortgage, your home value rises, creating long-term wealth. Compare that to making rent payments, where your landlord pockets your money and you see no return on your investment.
Speaking of equity, you can tap into it via a home equity loan or home equity line of credit, the funds from which can be reinvested into your property in the form of home improvements.
2. Enjoy stability
Landlords typically increase their rents every year, making it more expensive to lease a unit over time. But when you choose a fixed-rate mortgage loan over a set period – such as a 30-year loan with a fixed rate of 5.0% – you pay the same every month in principal and interest over 30 years. That provides healthy peace of mind and stability.
“When you own the space you are living in, you can avoid problems such as changes in management or landlords or even sudden termination of a rental contract, too,” notes Bob Scott, a real estate investor and founder of Sell Land.
3. Reap tax breaks
When you own your own home, you may be eligible for tax deductions that can lower your taxable income. One of these is the mortgage interest deduction, which allows you to deduct any interest you pay on your mortgage loan from your income.
“You may also be able to deduct a portion of your property taxes,” adds Sutherland. “And when it comes time to sell your home, you may not have to pay taxes on any profit that you make, depending on how long you owned and lived in the house as well as how much you sold the home for.”
4. Ability to customize
Neil Dempsey, a real estate investor and CEO of Four19properties, says homeowners enjoy the ability to personalize their residences, unlike renters.
“You can customize your home according to your preferences without waiting for someone else’s approval,” he says.
5. Enjoy privacy
When you live in an apartment, condo, or other attached living building, you can have noisy neighbors nearby who make life unpleasant. But when you purchase a detached single-family home, you have a buffer zone between you and your next-door neighbors. And that privacy can be a big deal.
6. Put down roots
In addition to financial advantages, research suggests that homeownership also reaps long-term social benefits. A study by the National Association of Realtors, for instance, reveals better educational achievement and a higher rate of civic dissipation among homeowners.
“There are also lower crime rates among homeowners, in part because stable neighborhoods spot perpetrators more easily. Being part of a community where you are involved in local government and the general well-being of those in the community goes a long way to improving quality of life,” Sutherland points out. “When you purchase a home, you are investing in the area’s school system, recreation areas, and policies that not only affect you but your neighbors.”
The pros outweigh the cons
Of course, there are drawbacks to homeownership.
“You have to maintain and repair the home and update it to make it look new. The mortgage loan is also an extended responsibility,” says Dempsey. “If you are not wise in managing your finances, you might not be able to fund the expenses you need to maintain your property.”
What’s more, there’s no guarantee that your home will continue to increase in value.
Nevertheless, the plusses trump the minuses for most.
“While there are risks that come with purchasing a home, owning a residence remains one of the best financial and emotional investments you can make,” Gelios adds.
Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.