Bend Real Estate: 5 Financial Benefits of Homeownership

Homeownership is a pillar of the American dream. Those who buy into the housing market often see major financial benefits.

Becoming a homeowner is no doubt one of the biggest financial decisions you will make in your entire life. Getting to that point requires a certain degree of financial success is also undeniable. You need to come up with a down payment and closing costs before you can even turn the key in the door.

But among those who take on the big task of homeownership, many see financial benefits that far outweigh their initial investment, especially during tax season. Here are 5 of them:

Stronger Financial Future

Owning a home is one of the fundamental means of accumulating wealth as we age. Thanks to inflation and natural population growth, home values generally increase by 3 percent to 4 percent every year in a strong economy.

Putting money into homeownership versus a rental is akin to the difference between putting money into an investment account versus a no-interest checking account, with the latter being only as valuable as it is in the moment while the former increases over time.

Tax Deductions

One thing people who have never owned a home don’t always think about are the tax advantages of homeownership. Whether you’re living in your first home or fifth, it’s a huge financial advantage to have some tax relief tied to the interest you pay each year. It’s one thing you definitely don’t get when you’re renting. And if you ever decide to refinance your home after building sufficient equity in it, you also have the option of taking out a home equity line of credit, which is itself tax-deductible.

Also, when you buy a home and consistently make your monthly loan payments on time, it demonstrates to other lenders that you are a good borrower and the risk of you defaulting on a loan is low. This strong credit history will be helpful in the future when you need other loans for buying a car, making improvements to your home, or paying other major expenses.

Homeownership Equity

When you subtract the amount you owe on your home loan from the total value of your house, the amount left over is your home equity – the “dollar” value of your home that actually belongs to you. There are two ways to build equity:

1. With each monthly mortgage payment you make, a portion goes toward reducing the amount you owe on your loan, which increases your equity. In a sense, paying your mortgage is a form of savings, as it increases the equity in your home.
2. As your home increases in value, it creates more equity for you.

As you build equity and grow your net worth, you can continue to reinvest those savings into your future, maybe even by buying that next dream home. The possibilities are truly endless.

Want to build equity even faster? Take steps to pay off your debt quicker (like financing with a shorter-term loan or paying more than you owe every month) or increase your property value (think home improvements and a focus on routine maintenance).

Housing-Related Costs

Another financial benefit of homeownership is when monthly costs become more predictable. With a mortgage, you can keep your monthly housing costs steady and predictable. Rental prices have been skyrocketing since 2012. With today’s low mortgage rates, it’s a great time to get more for your money when purchasing a home.

If you want to lock-in your mortgage monthly payment, buying a home is best.

Positive Perks of Homeownership

Lastly, homeownership has other financial benefits that may come in handy for you someday. A mortgage is considered “good debt” which is likely to increase your credit score. But to achieve this, you must pay your mortgage loan on time.

Bottom Line

Homeownership offers tremendous freedom to create a living environment that you have always wanted. You can own pets, paint rooms whatever color you like, and make changes to floors and carpeting. Do all the things that make a house your home – all without having to get approval from a landlord.

If you’re interested in learning more, reach out to our local Bend realtor, Cody Tuma, at 541-306-3139!