BENEFITS OF HOME OWNERSHIP
Owning a home is part of the American dream, however the idea of homeownership for someone that has never owned a home before can be a little intimidating; after all owning a home will require you to maintain the property, make mortgage payments on time to remain in good standing, retain homeowner’s insurance, and pay your property taxes.
“Home equity is the largest single source of household wealth for most Americans.”
*according to the United States Department of Housing and Urban Development (HUD)
In other words, more American wealth is created and maintained in real estate than any other type of investment. For those wondering what exactly home equity is, home equity is the difference between the value of your home and the outstanding balance of all liens associated with the property.
For example, if your home is valued at 500,000 dollars, and you owe 400,000 dollars on a mortgage, you have a 100,000 dollar equity position, or a 20% equity position.
Typically speaking a homeowner’s equity position grows the longer they stay in the home.
Paying down an amortized mortgage month after month will slowly build your equity position because a portion of your mortgage payment is used to pay off the balance of the loan (what remains is used to paid the accrued interest on the loan). In addition homeowners typically enjoy the privilege of appreciation.
Appreciation, by definition is an increase in the value of property. Typical causes of appreciation include but are no means limited to; inflation, new demand for property in a particular area, physical additions, modernizations, or the removal of a negative factor.
Reports indicate that most real estate average a 6.5 percent value increase each year.
Generally speaking homeowners should hope their home’s appreciation matches inflation which is typically around 3 percent a year. In addition homeowners are typically able to write off accrued interest paid on their primary residence’s mortgage, and enjoy tax free capital gains if they retain their primary residence for two or more years and sell their home for a profit. Homeownership with the right mortgage in place can also offer a fixed security in relation to monthly obligations. A fixed mortgage guarantees that the monthly obligation associated with a home loan will never change. Renters never enjoy this type of long term security in relation to the costs associated with shelter.
The U.S. Department of Housing and Urban Development (HUD) writes in one report:
“Homeowners accumulate wealth as the investment in their homes grows, enjoy better living conditions, are often more involved in their communities, and have children who tend on average to do better in school and are less likely to become involved with crime. Communities benefit from real estate taxes homeowners pay, and from stable neighborhoods homeowners create.”
The National Association of Realtors (NAR) states the social benefits of homeownership typically include:
- Better educational performance and better behavior of children.
- Lower community crime rates.
- Less household dependency among households.
- More household participation in civic affairs.
- Better household health.
All things considered the advantages of owning a home are significant. Regardless it is a large decision that cannot be made without all the necessary information. Regarding financing solution we look forward to presenting you with all available options the market has to offer so you can make an objective decision regarding buying a new home.
