Purchasing a home can bring significant benefits. However, there are many factors to consider when deciding whether it is better to buy a house or rent.
In addition to having a stable income and finding a mortgage with a reasonable interest rate, you also need to consider the state of the real estate market. The decision can be intimidating, but if you make informed decisions, you will likely end up in the right situation.
Purchasing a home can bring tax breaks and increase your overall wealth through home equity. You also get a stable living situation for yourself and your family, and you can enjoy the peace of mind from knowing that you always have a place to live.
Finally, unlike rental properties, when you own your home, you can make all the decisions about improvements, decor, and home care.
Here is a closer look at eight reasons why purchasing a home is worth it.
Table of Contents
1. You Are Ready
When purchasing a home, you need to prepare financially. When you are ready, you will have enough money for a down payment and you’ll have a credit history that qualifies you for a mortgage with a decent interest rate. You will also have the cash flow for monthly mortgage payments.
Buyers need to be emotionally ready to purchase a home. On one level, you must put emotions aside and think clearly about your financial situation, your housing needs, and whether the home that you choose meets those needs.
You also have to be able to dispassionately weigh your home needs in terms of your career trajectory, family plans, and other personal factors.
Finally, home ownership brings rewards, but it also comes with maintenance requirements and unexpected repair expenses. You need to be ready to handle the time commitment and stresses that come with owning a house.
2. Time For Stability
Home ownership brings stability to you and your family. Stability, in turn, brings social and developmental benefits. For example, you will become part of a community. Because you are living in one place for an extended period, you can participate in community activities and events and create connections with people and organizations in your neighborhood.
Home owners with children will also be able to give their kids a stable place to live. The young people will be able to attend the same schools throughout their academic careers and build relationships with other people in the area.
According to a report from the National Association of Realtors, there is a connection between children of homeowners and academic achievement. The report cited scientific studies that tied these successes in school to residential stability rather than the income level of parents.
3. You Have a Secure Job
Having a job is essential if you plan to purchase a home. You will need to make a downpayment, and the mortgage provider will need evidence of income to confirm that you can make monthly payments.
Mortgages often require regular monthly payments for 30 years. Because of this fact, you need to have a secure job or be on a career path that will lead to long-term job security.
According to the Bureau of Labor Statistics, homeowners spent an average of 32.9% of their income on housing in 2015. Consumer Reports found that financial advisors recommend capping housing costs at 25% of monthly income. So, ideally, you should have a job that pays enough so that mortgage payments only require between one-fourth and one-third of your monthly income.
4. Building Equity
One of the most significant advantages of home ownership instead of renting is the ability to build equity in your home. The value of your home increases over time, and it fluctuates depending on the state of the real estate market.
Ideally, you will eventually be able to sell your home for more than you paid for it, or you could also use it as collateral for future loans.
You can also make improvements, either on your own or by hiring a contractor, that will increase the value of your property.
In addition to being a place where you can live, your home can become a profitable long-term investment. What’s more, you can take steps such as paying off your mortgage early to decrease the overall amount of interest paid.
5. Tax Break on Mortgage Interest
You will have to pay property taxes on your home, but you will also get the chance to earn a tax break on your mortgage interest payments.
Currently, the IRS allows you to deduct your mortgage interest payments from your taxable income. If you took out your loan(s) before 2018, you can deduct the interest on up to $1 million in mortgage payments. For newer loans from 2018 or after, you can deduct the interest on up to $750,000 in mortgage payments.
To get this tax break, you need to itemize deductions using Schedule A, which you then attach to your income tax returns.
6. The Market Is Good
One of the most important considerations when buying a home is the state of the real estate market. Home prices can fluctuate depending on a variety of factors, including interest rates, the overall state of the economy, and the stock market.
The best time to purchase a home is when interest rates are low, but before demand for housing rises too much.
With a lower interest rate, you can get lower monthly payments, and you will have to pay less over the lifetime of your loan than you would have with a higher interest rate.
A home is an investment, so you will want it to increase in value over time. Ideally, you will buy when the market is at a low point so that you can enjoy the highest possible increase in value.
Even professional investors cannot always predict the bottom of a real estate bear market, but you can look at historical real estate prices to see if there has recently been a price decrease, and you can wait for the Federal Reserve (the Fed) to announce that it is lowering interest rates. Lenders usually follow the Fed’s lead and lower their rates as well.
7. Peace of Mind
Owning a home brings a certain amount of peace of mind. You do not have to deal with lease agreements or rely on landlords to make repairs or maintain common areas. If you rent an apartment, you would have to worry about noise from other residents and other nuisances.
These problems are not issues when you own a home. Your mortgage interest rate could change, but, unless you refinance, you will not have to negotiate new terms every year. You do not have to abide by any rules or regulations set by a landlord, and you can make repairs and changes as you wish without having to seek approval from anyone else.
8. The Home Will Be Yours
When you own a home, you are free to make decisions about decoration, renovations, your lawn, and other areas of your property. While you do have to abide by local zoning regulations and ordinances in your city, you are free to control the elements of your home.
You are free to use colors, materials, and features that meet your tastes and preferences. Also, you do not have to seek approval from anyone besides city zoning officials when making improvements that could increase the equity of your home.
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