Buying a home is a rewarding process for those who want to become homeowners and are sick receiving no return on investment from renting. While paying rent may save on short-term costs, using a mortgage to purchase a home is a long-term investment in the future of your financial security and independence. There are a myriad of practical reasons why you should consider the long-term benefits of investing in a home with a mortgage. The Home Loan Expert deeply believes that you deserve access to financial solutions that will allow you to reap the benefits of home ownership.
Advantages of Owning Your Home
There are some major advantages to owning your own home versus renting a home. Renting a home may cut down on certain initial costs, but over time, the advantages of buying your own home not only outweigh the short-lived advantages of renting, but the costs also tend to equalize. Following are some short and long-term benefits when it comes to buying your own home versus renting:
- Tax benefits. Having a mortgage qualifies homeowners to enjoy certain tax benefits. As a homeowner, both your mortgage interest and property taxes are deductible from your annual income taxes. Some renters may qualify for certain tax deductions within a much more narrow margin of eligibility, though the overall benefits are lower in value. Additionally, homeowners are able to receive those same tax benefits, such as if you use your home as an office space for self-employment.
- Appreciation in value. According to the available data on housing prices, “national appreciation values have averaged around 3.5 to 3.8 percent per year.” In other words, your real estate investment is likely to trend upwards in value over the long-term. The old adage of “location, location, location” applies here. Locating a house in an area with a high appraisal value depends on being able to analyze some essential factors, such as crime rates, neighborhood rankings, school districts and more. You can get started estimating the potential value of appreciation on a house using some online resources like zillow.com or realtor.com Real estate agents can provide a Comparative Market Analysis of the home you are interested in purchasing to get an idea of how the house compares in value to other homes in an area.
- Building Equity. Equity is the market value of your home minus what you owe (your mortgage and loans). When you rent, you build zero equity. Equity is a homeowner’s most valuable asset and a long-term strategy for building wealth. According to CoreLogic’s homeowner report analysis, “U.S. homeowners with mortgages (roughly 62% of all properties) have seen their equity increase by a total of nearly $1.9 trillion since the first quarter of 2020, an increase of 19.6%, year over year.” This indicates that home equity trends are rising. Additionally, it was found that negative equity decreased. Similar trends have continued into 2021, indicating that the overall value of houses nationally will continue to appreciate. Additionally, homeowners are able to borrow against their home equity to pay for things like college, home renovations and other large expenses, or to consolidate debt. If you eventually decide to sell your home, you are able to take that equity and use it as a down payment on a new home.
- Build Credit. Paying rent can impact your credit score depending on if you are able to pay rent on time. Late rental payments are being increasingly reported to credit agencies, to tenants’ detriment. Having a good rental track record can help your credit score, but you are reliant on your landlord’s ability or desire to provide that information to crediting agencies. It is still not a standardized practice and the advantages are not set in stone. Paying a mortgage on a house, on the other hand, is a great way to build credit, as 35 percent of your FICO score is determined by your debt payment history. To increase your credit score via a mortgage payment, you must consistently make payments on time and manage your debt-to-income ratio.
Choosing the Right Mortgage
Finding the right mortgage that suits your financial needs does not have to be an intimidating experience. There are many options available to suit the unique needs of individual borrowers. Choosing the best mortgage depends on determining your individual financial circ*mstances and goals.
One way to get started is by using a financial calculator to determine how much house you can afford. Your housing payment should be no more than roughly 28 percent of your salary. In addition to your mortgage payment, there are other costs to consider when buying a home, like a down payment and closing costs.
Select a time frame that suits your needs. A 30-year mortgage takes more time to pay off but offers lower payments, but a 10–15 year mortgage can be paid off more quickly, freeing you from your mortgage loan in a relatively small number of years. This is an important aspect of homebuying to ponder, as interest can eat at a noticeable chunk of your income over time.
The reality is, if you are paying rent, you should find a mortgage that is comfortably comparable to what you would pay each month in rent. Even with paying back the interest, you are still building equity with a house and working to eventually own something that is yours, allowing you to be more financially independent.
Experienced Experts in Residential Lending and Mortgages
With more than 20 years in residential lending, The Home Loan Expert has the benefits of both a small community feel and the combined expertise of some of the nations top real estate advisors. Our company sits on a foundation of humble beginnings, having been built from the bottom up, and is professionally licensed in 12 states. Over the last year, we have successfully helped residents acquire mortgages for a combined total of a billion dollars in closings.
We are a family-oriented business that is passionate about giving back. Our mission is driven by helping everyday people realize their dreams of owning a home. Our team of dedicated experts are here to guide you in finding the financial plan that best suits your needs on the pathway to homeownership. Start your journey with a personal five-minute loan approval application. Don’t wait to reach out to our team of experts ready to go over your application or call us at 800-991-6494.
