Many people don’t realize just how many benefits there are to owning their own home. At Berkshire Hathaway HomeServices, we work with homebuyers and sellers from start to finish to ensure they have the help and information they need to make the right decisions. Call us at (310) 373-0021 if you need help.
You can choose how much you pay each month
The basis for a consistent monthly payment for homeowners is the 30-year fixed-rate mortgage. The days of anxiously anticipating letters from your landlord requesting a rent increase are long gone.
A fixed-rate mortgage has an ongoing principal and interest payment that you can reduce by refinancing if interest rates decline over time. If you’re okay with a higher monthly payment, you can even decide to pay off the loan sooner with a shorter term (like 15 years).
With each monthly payment, you’ll increase your home equity
When you own a home that is mortgage-financed, each monthly payment increases equity. You can see exactly how much you’re paying toward your interest charges and your loan balance by looking at the amortization schedule that was included with your closing documents.
The majority of the money is initially used to pay interest. However, as time goes on, the gap between the value of your house and the amount still owed on your loan grows; this gap is referred to as your home equity.
Your house will appreciate over time
One thing is obvious from a graph of home values since the 1960s: Home values often rise the longer you own a house. Appreciation simply refers to the likelihood that the value of your home will increase over time.
To estimate how much your home might be valued, you can use a home value estimator or browse online listings for homes for sale in your neighborhood. Additionally, you can increase the value of your house by making improvements, and many fixer-upper mortgage programs let you combine the price of those projects into a single new mortgage loan.
Home equity can be used to increase wealth
Homeowners have a significant financial advantage over renters since they can accumulate equity through consistent monthly payments and rising home values. The median net worth of homeowners through 2019 was $255,000, compared to a median net worth of $6,300 for renters, according to the Federal Reserve’s most recent Survey of Consumer Finances.
A tax deduction may be available
The mortgage interest deduction is a significant tax advantage of home ownership. Home mortgage interest is deductible from federal taxes, which may result in a decrease in your tax liability. The early years of a 30-year fixed mortgage are often when this benefit is most advantageous because the majority of your monthly payments are made to interest rather than principal.
However, there are other tax advantages to owning in addition to the mortgage interest deduction. You may also subtract the costs of mortgage insurance. Mortgage insurance fees are usually charged if you put less than 20% down or obtain a loan from the Federal Housing Administration (FHA). You might be able to write off the cost of your mortgage insurance depending on your income.
You can also benefit from tax breaks for real estate taxes. If you’re single or married and filing jointly, you can write off up to $10,000 in property taxes. When filing separately even though you’re married, the deduction cap is reduced to $5,000.
Are you ready to get started? Contact Berkshire Hathaway HomeServices and let us help you in this process.