There are numerous reasons why you should consider owning a home instead of renting. In this article, we provide you with 27 home ownership benefits. We’ve broken these up into financial, lifestyle, and social benefits for easier reading.
1. Cheaper than Renting over Time
Buying a home and paying a mortgage is generally cheaper than renting if you plan to stay in the same area for more than four years, according to The Lenders Network.
Most landlords charge between 0.8% and 1.1% of the home’s value to determine the price of renting. And many times, these fees will go up each year you are there unless you have a fixed agreement to keep the same rental payment throughout your term.
When you buy a house, you can get lower monthly payments, depending on your credit, interest, and the home’s purchase amount.
Here’s a helpful rent vs. buy calculator to determine which method would be cheaper for you.
2. Historically Low-Interest Rates
Over the last ten years, interest rates have slowly declined, which means you have to pay less for your home. This decrease hit record lows in 2012 when the rate dropped to 3.31% from an average of 3.66%.
These rates have fluctuated between then and now as we’re entering into the second week of 2021. By 2019, the interest rates were 3.63% (low), a dramatic decrease from the average rate of 4.25%.
Financial projections predict that in 2021, a 30-year mortgage will come with a historically low mortgage rate of just 3.03%, the lowest it’s ever been. There’s never been a better time to buy a home.
3. Wealth Accumulation
Owning a home has become one of the easiest ways to increase wealth and become financially stable. Having a place to call your own is part of the American Dream, including a great job, marriage, kids, and pets.
Having a monthly mortgage helps build your savings. Paying down your loan’s principal gives you equity, which increases net worth.
And the majority of homes increase in value over time. In their House Price Index, the Federal Housing Finance Agency states that home values increase on average 3.6% every year since 1991, which adds to your equity, and therefore net worth.
4. Tax Deductions
Owning a home can qualify you for federal tax breaks. But only if you are eligible for itemized deductions that exceed IRS standards. In 2020, the deduction qualifications were:
- $12,400 – Single
- $24,800 – Married filing separately
- $24,800 – Joint filers
- $18,650 – Head of household
For the 2021 tax season, the deductions will be slightly different. These figures look like this:
- $12,550 – Single
- $25,100 – Joint filers
- $12,550 – Married filing separately
- $18,800 – Head of household
You have two options for your tax return – standard deduction or itemization. When claiming the standard deduction, you won’t be able to deduct your home mortgage interest or claim other tax deductions.
When you itemize your deductions, you can claim multiple expenses to reduce the taxable income. Be sure you keep detailed records in case you face an IRS audit.
To determine whether to claim your standard deduction or itemization, figure out which value is higher. That option is the best way to save you money.
5. Capital Gains Exclusion
With the Capital Gains exclusion, you can sell your home without having to pay taxes on your profits. However, there are some stipulations you must meet to qualify for this exemption.
The terms for capital gain follow the Taxpayer Relief Act of 1997, which states that any capital gain (the profit you make selling your house) below $250,000 for a single filer or $500,000 for married couples is not taxable.
Now, to qualify for no capital gain tax, the house you sell must be a primary residence that you lived in for two years. These years do not have to be consecutive.
You can also count all of your full costs and subtract this value from your sales price, reducing the capital gain and helping you qualify as exempt.
To figure up your full costs, factor in the price you paid for your home, purchase expenses (settlement fees, insurance, closing costs), improvements, additions, and selling costs (agent commissions for sale, attorney fees, transfer taxes).
However, you can only qualify for the capital gain exemption once every two years. If you sell two houses within two years, you will owe capital gain taxes on the second house you sell.
6. Building Equity
Home equity is an easy way to increase your net worth. To determine your equity, you look at your property’s current value and reduce what you currently owe.
This value should be positive. Your home gains equity as property values increase over time and by reducing the principal balance, you owe on your loan.
Now building up equity does take time. It would help if you considered your home as a piece of long-term investment. The money you’re earning from your home may increase your net worth, but it’s not money you can access and spend.
Figuring up your home equity can be as simple as using an online calculator, which does the math for you. All you have to do is add your figures. You can also rely on an appraisal of your home, which can help you figure out your home’s actual value.
7. Improve Your Credit Score
Everyone knows that your credit score matters when you want to take out a loan or buy a house. But owning a home can also help improve your credit score.
All mortgage lenders report your account to the three credit bureaus. As you manage your loan, credit bureaus track your activities and change your credit score to reflect your payments.
Paying your mortgage on time each month can have a 35% impact on your credit rating. If you fall behind in payments, your score will drop. But if you stay on top of your mortgage and pay on time, you’ll quickly see your credit score going up.
However, having a mortgage may prevent you from qualifying for additional loans if your monthly payments are too high.
8. Stable/Predictable Monthly Payments
Another benefit of owning a home is that having a fixed-rate mortgage makes budgeting your money a lot easier.
When you use a fixed-rate loan, your monthly repayment is always the same amount, no matter what. So, you’ll still know how much to save each month, and you can make long term plans for how to handle your mortgage.
When you rent a home, you may face rent increases when it’s time to renew your annual lease. You may know what your budget should be for that year’s lease, but you won’t have a guarantee on how much you’ll need to save for the next year or two.
9. Hedge Against Inflation
Given that inflation can change the value of money, it makes sense to invest in hedges that retain or increase value over time. Real estate is one of the best hedge investments you can make.
Home values mostly increase, even during inflation, when the value of money decreases. So owning a home means that you’ll always have something that retains the same value (or more), no matter the inflation rate.
10. Borrowing Power
When you own a home, you have equity that can help you borrow more money against your property. These extra funds can come from a second mortgage, a line of credit, or an equity loan (HELOC – home equity line of credit).
Many people take out these loans to help pay for home improvements or their child(ren)’s college. Or to cover unexpected or desired expenses, such as medical bills or buying a new toy (RV, boat, vehicle, vacation home).
Most HELOCs will qualify for lower, adjustable rates based on your home’s equity. And any interest paid on a HELOC is tax-deductible for the majority of borrowers. You can use the funds from a home equity line of credit to pay for anything you want.
11. Forced Savings Plan
Having a monthly mortgage means that you now have a forced savings plan. Each payment you make on your mortgage reduces your interest and amount owed, which can help increase the money you’d put in your pocket if you decide to sell.
Many people choose to increase their savings by paying extra payments or paying more than required each month, which reduces the amount of interest you have to pay by getting your mortgage paid off quicker.
12. Gift Money Can Be Used as a Down Payment
Using gift money is one of the most common ways that younger buyers come up with the funds to cover their down payments.
However, there are rules you have to follow to use gift money. And there are limitations on who can provide gift money, so you can’t get financial help from just anyone.
Mortgage lenders require gift money to come from friends and family or from a government organization that helps first-time buyers.
You must prove your relationship with a friend or family, usually in the form of a letter signed by both parties expressing that the money is a gift and does not require repayment.
13. Bring in Extra Income by Renting a Room
Depending on the size of your home, you may have extra rooms that you don’t use. A great way to increase your income is to rent these additional rooms out.
Many people now have one or more roommates, which helps increase your income and reduce the amount of money you have to pay.
There are challenges to taking in a boarder or roommate, such as incompatibility, the potential of getting stuck with someone who doesn’t pay for their room or having someone that doesn’t follow the house rules. It may also be awkward sharing your space with someone.
14. Free to Create the Home you Want
When you rent a home, you often have limits on the changes you can make. So you’re stuck living in a house that may not be your style.
But when you own your home, you’re free to do any customization you want. However, you may have to get the approval of a home owner’s associations or historical societies.
When you’re the owner, you can paint the walls in any color, which is excellent for those who like funky colors or designs. You can also change your flooring or the layout of the home. Whatever dreams you have, you can do to your house when you own it.
15. No Restrictions on Pets
One of the worst things about renting a home is that there may be restrictions on owning pets. You may only be able to have certain breeds or limit how many pets you can keep.
As a devoted pet parent of two fur babies, one of who is a Pit Bull, owning a home was the only choice we had if we wanted to keep our four-legged children. Most renters have rules against the Pit Bull species (unfounded and unnecessary).
So if owning pets is an essential factor, you may find it’s better to buy a home than to try renting. When you buy a house, no one will be able to tell you what pets to own or how many (unless there are local or state laws).
16. Positive Impact on Health
Multiple studies show that owning a home can positively impact a homeowner’s health, both physically and emotionally. Homeowners have a 2.5% higher rate of better health than renters.
Most homeowners experience higher self-esteem, an improvement over general happiness and satisfaction, and stronger bonds with their family.
Being part of a neighborhood can help improve a person’s sense of community, increase their pride in their accomplishments and success, and form a sense of belonging and stability. When you know you will be at a place long-term, you feel more invested and stable.
17. More Privacy Than Renting
When you rent a home, the property owner has legal rights to enter at any time without seeking permission. Owners can also send over employees or service professionals, even if you’re not home, to let them inside.
But when you own your home, you have full control over who can come and go. You never have to worry about nosey landlords or surprise visits. And you certainly don’t have to concern yourself with strangers having access to your home.
You also have more privacy in the form of a yard that you can fence to prevent prying eyes. You can enclose your property to create an exclusive oasis that no one else can enter.
18. Pride of Ownership
When you own a home, you can feel a sense of pride in what you’ve achieved. Your house is yours bought from your sweat and tears. It’s something you can show off as proof of all of your hard work.
Most people put their heart and soul into designing their home, and it becomes a reflection of the people who habitat the area. Your home becomes your safe place, one that you’re proud to show off.
Being proud of your home is one of the most significant benefits of being a homeowner. When you’re proud of what you’ve got, you have proof of your success for everyone to see.
19. Upgrading to a New Home
When you own a home, you have an equity source, which increases your income and value. This extra money can come in handy when it’s time for you to upgrade to a new home.
You may decide to relocate for a new job, buy a bigger house so there’s more room for your growing family, or move into a better neighborhood.
When you have a home that’s earned equity and appreciation, you can use these extra funds to put money in your pocket and afford more of a down payment for a new house.
First time home buyers typically put down as low as a 3% down payment, whereas homeowners who have already owned a home are more likely to put down as much as 22% down.
20. Leaving an Asset to Children/Future Generations
When you own a home, you have a potential asset that you can leave behind for your children or even your grandchildren.
Some people sign up for a “Transfer-on-Death” deed (in applicable states), which transfers ownership of a property to the named benefactor(s) upon the homeowner’s death. Other families may decide to gift their home to their children or sell it to them at a lower price than the market value.
Having your affairs in order is smart to protect your family from any legal hassles that may occur from an unexpected death.
21. Civic Participation
Most homeowners have a strong sense of civic participation, which is when you engage in activities outside their home.
Examples of civic participation include volunteering, voting, or joining neighborhood group activities. When you work on your civic participation, you can enjoy the social skills of belonging to a group of like-minded neighbors.
As a neighborhood member, you may enroll your children in local recreational sports, sign up as a volunteer, or attend neighborhood cookouts or meetings.
22. Community Involvement
When you’re a homeowner, you often feel more involved in your community. You may feel a stronger urge to keep up with local politics, to cast your vote on your child’s school board, or join neighborhood groups.
Most communities have neighborhood watches, outreach programs, or clean-up days. When you’re a community member, you may feel more inclined to help keep your neighborhood at its best.
Your neighborhood can play a significant role in the value of your home. So you want to do the best you can to keep it safe and clean so your property increases or maintains the same cost.
23. Financial Education/Skills
Owning a home may seem simple, but it requires you to have a working understanding of how to manage your finances.
You can use the money management skills you learn from being a homeowner and implement them into other areas of your life.
You don’t have to take any special classes or programs to own a home, but it can help you learn to plan your money spending habits properly.
24. Stable Housing
Another of the most significant benefits of owning a home is that you have stability. Your home is yours, and you never have to worry about being evicted or relocated if the homeowner decides to sell.
When you own a home, you can put down roots and plan your future without worrying about where you might live in two, five, or ten years.
For families with children or intentions of having them, having a stable home to grow up in improves self-confidence and provides a happier, adjusted life.
25. Educational Achievement
Children who grow up with parents who own a home have a higher chance of completing school than kids raised in a rental home.
When children feel secure in their home and neighborhood, they get better grades, have more stability, and a better chance of forming positive relationships and friendships.
And young adults that grow up in the same owned home throughout their childhood have a higher rate of getting advanced education and a higher-paying job.
26. Positive Effects on Children
Many studies have proven the positive effects of having parents who own a home has on children. We’ve discussed how it can improve the chances of completing high school and continuing to higher education.
Children who live in a home bought by their parents also have fewer behavior issues, better health, and fewer teen pregnancies. They also have higher grades in reading and math.
Overall, children raised in a purchased home over a rental home have a higher chance of being successful as an adult.
27. Less Likely to be Victims of Crime Than Renters
When you own a home, you have fewer chances of becoming a victim of crime than you would as a renter, studies show. Renters face the challenges of not preventing strangers from entering into their homes, which can result in theft or destruction of property.
And because crime can affect your property value, homeowners often have more security for their homes, such as cameras, security alarms, or neighborhood watches.
Neighborhoods made up of homeowners instead of renters pay more attention to what’s going around them, which reduces crime levels. There’s less likelihood that a drug dealer can stand on a street corner and peddle drugs to the community when people own their homes.