Top 7 Benefits of Home Ownership, Part 1|
by Tim Lockhart
Top 7 Benefits of Home Ownership, Part 1
The last few years have been really difficult for the real estate market, and many people are wondering if now is really a good time to buy a home or not. Many other people want to buy a home, but are stuck in the rent trap because the banks continue to tighten their lending standards and shut people out who would have qualified only a few short years ago. This article will discuss the Top 7 benefits of owning a home versus renting.
1. Steady Payments: One of the first differences to realize when considering owning versus renting is what happens to your payments over time? Most bank mortgages have 4 parts included in their payments: principal, interest, taxes and insurance. This is referred to as PITI. The largest portion of the payment is the principal and interest, or “PI”. If you buy a home with a fixed rate mortgage, then your PI payments will stay the same for 30 years. The only change will be for insurance and taxes each year, but the major portion of your payment stays constant. If you compare that to renting, most landlords raise their rents every year with the rate of inflation. Consistency in your payment from year to year gives you stability in your family budget and the ability to plan as well as protection against inflation and higher interest rates.
2. Tax Savings. Even though there has been discussions lately in congress about how they want to get rid of this benefit so the government can take more of our money to spend on their entitlement programs, currently home owners still get to take advantage of this huge benefit of deducting the interest portion of our mortgage payments from our taxes. Most renters I talk to are really unaware of this significant benefit. See, when you rent, you are paying a mortgage payment… your landlord’s. This mortgage payment includes a principal portion that pays down the balance of the loan every month, but it also includes an interest portion which pays the bank for the right to use the money. Congress knows that there are many benefits not only to individual families, but to the national economy to increasing home ownership. S0, many years ago, the U.S. government decided that as an incentive to get more people to buy a home, they would give all home owners the ability to deduct the interest portion of the mortgage payment from their taxes. This can be the difference from being able to itemize your taxes and taking the standard deduction. Because of the way mortgage payments are calculated, the majority of the interest is paid up front, so the first 5-10 years you live in a home most of the payment you make can be deducted from your regular income. This is like giving yourself a raise of a couple to maybe several thousands of dollars a year, just by switching from paying your landlord’s mortgage to paying your own mortgage. If you buy a home, you can go to your employer today and ask to change your deductions that they take out of your paycheck and immediately put more money in your pocket every month…starting right away.
Today, we’ve looked at the first 2 of the Top 7 reasons to own a home rather than renting. These are pretty good reasons, but they pale in comparison to what we will see in Part 2. Next time we will look at how we can build equity, and what that really means in dollars and cents. In another article, I will speak on the struggles many families are having buying a home in today’s market, and it may be that someone else like a bank is making the decision for you, forcing you to rent. Please check out other articles we have on our website www.QuelleProperties.com, and see the solutions we offer to those who have been turned down by the bank, but still want to own a home. There are other options, and we even allow you to build equity while you rent. Check it out. Tim Lockhart is the President of Quelle Properties, Inc. They’ve been real estate entrepreneurs since 2002 and their mission is to improve their community by increasing home ownership in north Texas. He has many articles and news items related to real estate on his website, www.QuelleProperties.com
Tim Lockhart is the President of Quelle Properties, Inc. They’ve been real estate entrepreneurs since 2002 and their mission is to improve their community by increasing home ownership in north Texas. He has many articles and news items related to real estate on his website, www.QuelleProperties.com.