You’ve heard over and over again how much you can benefit from owning a home — especially from that uncle at Thanksgiving who won’t stop talking about equity. We hate to break it to you, but your uncle was right; there are so many benefits homeowners can take advantage of!
If you’re thinking about buying a home, here are some of the many “pros” associated with homeownership, from both a financial and social perspective. And if we’ve convinced you to buy a home in the Ann Arbor area, you know who to call!
You Build Equity
Equity is the difference between how much you owe on your mortgage and what your home is currently worth. So each month you pay your mortgage, you are building equity in your home — slowly increasing that difference as you chip away at your mortgage month after month. The home becomes an appreciating asset with a value you get to take advantage of in the long run. Otherwise, when you are renting, you are essentially handing over money to your landlord on a monthly basis that you will never see again.
The Value of Your Home Will Increase Over Time
In general, properties tend to increase in value over time. So the longer you own a home, the more it is likely to appreciate. There are several factors that contribute to a home’s appreciation, including any updates you make, general upkeep and maintenance, neighborhood improvements, and the overall state of the real estate market. But mostly, time is on your side! And when it comes time to sell, you can use the equity you’ve built in your current home to go towards the down payment in your next home.
You Can Control Your Monthly Payment
We’ve all been blindsided by unexpected rising rent costs, which can be devastating to the monthly budget. Plus, you never know when your landlord might raise rates again, as inflation rises and the economy shifts over time. It’s a very unsettling feeling! On the flip side, when you own a home, you are in control of your monthly payment, which stays the same unless you decide to change your mortgage terms. It’s called a “fixed-rate” mortgage for a reason — it will not change over the course of the loan, resulting in consistent interest and principal payments for the borrower.
You Might Get a Tax Deduction
Homeowners often qualify for a tax deduction — or money back in your tax return. There are several tax incentives you should be aware of, including a mortgage interest deduction, property tax deduction, necessary home improvements deduction, and an exemption in capital gains from a home sale. These deductions could save you hundreds on your tax return, so speak to a tax professional when it comes time to file!
You Build Wealth
All of these financial benefits come together to positively impact your overall net worth. Homeownership is one of the best ways to build wealth in the long run. In fact, a recent study by the Federal Reserve found that the median net worth of homeowners in the U.S. is 40 times higher than the median net worth of renters.
To start building that wealth, sometimes just getting involved in the market is enough. You can first buy a starter home, hang onto it and rent it out, or sell it in exchange for a larger space, eventually working up to your forever home. It’s a lifelong process — something that doesn’t happen overnight.
You Build Credit
When you own a home, you have the opportunity to improve your credit score — as long as you make your monthly payments on time! In 2020, LendingTree conducted a study that found that millennial homeowners had a median credit score of 692, while non-homeowners had a median score of 601. A higher score gives you an advantage, as you can secure other forms of financing in the future, like purchasing a new car or financing an investment property. Plus, when mortgage interest rates drop, you may be able to refinance your home at a lower rate.
You Can Make Changes to Your Home
When you rent a home or an apartment, you are stuck with the outdated cabinets, old carpets, ugly light fixtures, weird wall colors, or other less-than-ideal design elements. But if you own your home, you can make all the changes you want, both minor and major. You can completely make the home your own, by painting it your favorite color, ripping out carpets, redesigning the kitchen, or even adding on additional square footage if you wish! Owning gives you unlimited creative freedom and flexibility.
You Have More Space and Privacy
Let’s be honest — it’s hard to maintain privacy in an apartment complex, where you’re sharing common space and amenities with dozens — sometimes hundreds — of other people. When you own your home, you are given more privacy, and sometimes that means more space, in the form of additional square footage or a backyard. And in that yard, you can plant your favorite flowers and trees and do other landscaping projects!
You’ll Become More Rooted in the Community
When you have buy-in, you are more likely to establish roots in a community. It is easier to provide stability for you and your family from a social perspective, when you know you will be stationed somewhere for a while. In fact, studies show that those who own their home are more likely to get involved with the local community, joining neighborhood groups, volunteering, or simply taking the time to get to know their neighbors.
Convinced?
If you are looking to buy a home in Michigan, we can definitely help with that! Our agents have decades of experience in real estate and are knowledgeable about both the buying/selling process and the nuances of the local market.
