8 Reasons You Need to Become a Homeowner
Buying a home is the largest investment most people ever make. It's also one of the best.
Buying a home is often a financial challenge. But it can be one of the best ways to accumulate wealth over time.
In addition to offering possible tax advantages, homes build equity.
If you buy a home with a fixed, 30-year mortgage, you can lock in stable monthly payments. In contrast, renters face ever-escalating housing costs and receive no return on the money they spend.
Here are some reasons it makes sense to be a homeowner:
1. Real estate appreciates
While there are no absolute guarantees in real estate, homes typically increase in value over time, which generally makes homeownership a sound investment.
In fact, Money Talks News founder Stacy Johnson — who has been investing in real estate for about 40 years — says real estate offers similar long-term returns as stocks.
As he explains the two investments:
“They usually beat inflation — both of them — by a few percentage points. Sometimes you’ll obviously be way better or way worse in either one. But generally speaking, over time, they’ll both do about the same.”
The people who lose money in residential real estate transactions often are buyers who try to make money quickly. If you plan to live in a home for at least 10 to 15 years, short-term drops in housing prices are unlikely to cause you to lose money.
2. You’ll be forced to save money
Because a mortgage requires monthly payments, homeowners are forced to “save” money each month. “With every payment, you are putting some money away by paying down the mortgage.”
3. You’ll build equity
Making monthly mortgage payments also builds home equity. Basically, as you pay down your loan, your debt decreases, which in turn increases the portion of the home that you own free and clear — that is, your equity.
You can determine how much equity you have by subtracting the balance of your mortgage loan from your home’s market value. For example, if your home could sell for $300,000 and you owe $150,000, you’ll have $150,000 in equity.
4. You can avoid housing payments in retirement
Housing is the largest expense for households headed by someone age 55 or older, according to the U.S. Department of Labor. However, as a homeowner, you can avoid most of those housing expenses in retirement if you pay off your mortgage. That frees up income for other uses.
5. You won’t have to worry about being evicted
When you own a home, no one can force you to leave as long as you keep up the mortgage payments. That’s not the case when you’re a renter. The landlord could evict you if you violate terms of the lease. A landlord could also opt not to renew a lease if there are plans to convert a rental property into condominiums, or to sell and tear it down to make room for new housing developments.
6. You’ll have more freedom
A landlord’s rules can seem invasive. For example, landlords are entitled to enter units for inspections periodically.
Rules can also be restrictive. Parking regulations at apartment complexes can limit your ability to entertain guests, for example. Pet regulations can limit the size, number or type of animal you can have.
When you own a home, you gain more freedom. You can own pets, choose your own colors when painting rooms and replace the carpet or lighting fixtures.
7. You can remodel
When you rent a home, you’re stuck with the existing floor plan. If you’re the owner of a single-family home, though, you can remodel if the need or desire arises.
You might need to add a room to take in an aging parent or accommodate grown children who have returned home for financial reasons. Being a homeowner can give you the freedom to do that.
analysis by the nonprofit Pew Research Center, as of 2016 a record number of people in the U.S. — 64 million, or 20% of the population — lived in a home with multiple adult generations.
8. You might enjoy tax advantages
Under the Tax Cuts and Jobs Act of 2017 — the tax reform law — the federal income tax deduction for mortgage interest remains available. However, it has been reduced and is less attractive to many taxpayers than it used to be.
Taxpayers whose mortgages were taken out after Dec. 15, 2017, generally can deduct interest on mortgage debt of up to $375,000 — or $750,000 for people who are married and file joint tax returns. Previously, the limits were $500,000 and $1 million, respectively.
Interest on home equity loans and home equity lines of credit (HELOCs) also remain tax-deductible — but only if the loan or HELOC is used to buy, build or substantially improve the taxpayer’s home, according to the IRS.
