Here Are 10 Benefits of Owning a Home

The expression “home is where the heart is” usually appeals to the emotional pull many people have about homeownership. Once you determine you’re financially ready, you’ll find the benefits of owning a home often outweigh the risks. If you’re on the fence about buying a home, check out these 10 advantages of homeownership.

1. You have more control over your monthly housing payment

Gone are the days of anxiously waiting for the rent increase letters from your landlord. A 30-year fixed-rate mortgage provides homeowners with the foundation for a stable monthly payment.

The principal and interest payments on a fixed-rate mortgage stay the same for the life of the loan, and you can lower it by refinancing if rates drop over time. You can even choose to pay off the loan faster with a shorter term (like a 15-year loan) if you’re comfortable with a higher monthly payment.

2. You’ll build home equity with each monthly payment

Each monthly payment builds home equity — the difference between your home’s value and your remaining loan balance — when you own a home financed with a mortgage. Looking at the amortization schedule that came with your closing paperwork, you can see exactly how much you’re paying toward your interest charges and loan balance.

At first, your lender will apply the bulk of your payment toward interest. But over time, you’ll pay down more of your loan balance and build more equity.

You can convert your home equity to cash and use it to:

• Pay for improvements that increase your home’s value
• Consolidate high-interest-rate credit card debt
• Pay for college or start a business
• Purchase a vacation home or rental property

The bottom line: Owning a home allows you to build equity for yourself, instead of building equity for your landlord.

3. You can convert your home equity to cash

There are several ways to tap into your home’s equity without selling your home. Lenders don’t restrict how you use the cash, so you can apply it to various financial goals, including debt consolidation, home improvements or real estate investing.

There are four ways to tap into your home equity:

1. Cash-out refinance. A cash-out refinance involves taking out a larger loan amount — for more than you currently owe — and pocketing the difference in cash. Most lenders allow you to borrow up to 80% of your home’s value for this type of refinance.
2. Home equity loan. A home equity loan is a popular choice if you prefer to borrow against your home’s equity without replacing your current mortgage. You’ll receive funds in a lump sum and typically pay a fixed rate that’s slightly higher than what you’d get with a cash-out refinance.
3. Home equity line of credit (HELOC). A HELOC works like a credit card, but is secured by your home. You only make payments on the amount you use, and you can pay off and reuse the credit line for a set amount of time — usually 10 years.
4. Reverse mortgage. Homeowners aged 62 or older can convert their equity to cash with a reverse mortgage. This specialized program for seniors has an added benefit: No monthly mortgage payment.

Learn more about how much you could borrow using a home equity loan calculator.

4. Your home value can appreciate over time

If you look at a graph of home values since the 1960s, one thing is clear: Home values usually increase the longer you own a home. This is called “appreciation” and simply means your home’s value will likely rise with time.

You can track your home’s value by using a home value estimator, or by researching the sale prices of homes nearby. This will give you a clearer idea of what your home might be worth. You can also make home improvements to boost your home’s value, and plenty of fixer-upper loan programs allow you to roll the costs of those projects into one new home loan.

5. You can use home equity to build wealth

The ability to build equity and own an asset that may appreciate in value gives homeowners a powerful advantage over renters in terms of building wealth. In fact, the Federal Reserve’s most recent Survey of Consumer Finances shows the median homeowner net worth through 2022 was $396,200, compared to a median net worth of $10,400 for a renter.

6. You might qualify for tax deductions

One of the major tax benefits of owning a home is the mortgage interest deduction. Home mortgage interest is tax deductible, which could mean a reduced federal tax bill for you. This benefit is typically the most helpful in the early years of a 30-year fixed-rate mortgage — when most of your monthly payments go toward interest rather than principal.

Mortgage interest charges aren’t the only housing costs you can deduct. Check out these additional tax benefits for homeowners:

• Home equity loan interest. You could be eligible for a tax deduction on the interest you pay on a home equity loan, if you used the loan proceeds for substantial home improvements.
• Property taxes. You can deduct up to $10,000 worth of property taxes if you’re single or married and file taxes jointly. The deduction limit drops to $5,000 for married couples who file their taxes separately.

7. You’ll build credit

Higher credit scores give homeowners an extra advantage: When mortgage rates drop, homeowners can snag a lower rate and payment by refinancing, while renters are stuck with the same monthly rent payment regardless of their high credit scores.

Higher credit scores may also help homeowners avoid trouble with their monthly payments.

  Don’t know your credit score? Get your free score on LendingTree Spring today.

8. You have more freedom over your living space

Whether painting a child’s room their favorite color or customizing a game room in the basement, buying a home gives you the power to modify your property however you choose. You don’t have to ask a landlord’s permission to make changes. However, certain restrictions may apply if your property is run by a homeowners association (HOA).

9. Your family may benefit from the community you live in

Owning a home adds an element of stability to your day-to-day life that renting often can’t match. When you own a home, there are added social benefits worth noting.

You may not move as much

People who own their own homes tend to move less than renters, which could give them a sense of security. Homeowners typically live in their homes for 10 years before selling, according to research from the National Association of Realtors (NAR).

This stability for homeowners may stem from the predictability of a fixed mortgage payment. On the other hand, renters face the possibility of rent increases or their landlord not renewing their lease, forcing them to find a new place to live.

Your children may do better in school

Studies have consistently shown that homeownership contributes to higher rates for high school graduation and greater rates for college qualification. Some of this may be attributed to the control homeowners have over the condition of their homes, and involvement in community organizations like local school boards, homeowners associations and other civic activities.

You’ll be more prepared for life’s curveballs

Having equity in your home, with a reserve of it in the form of a home equity loan or HELOC, can give you an advantage if you’re suddenly laid off. Access to this equity reduces your reliance on high-interest debt, such as credit cards.

Lenders are also required to follow strict policies to help financially challenged homeowners. Options range from putting a temporary pause on your mortgage payments with a forbearance, to permanently renegotiating your mortgage terms through a loan modification to make your payments more affordable.

10. You may enjoy homeownership health benefits

Nearly two-thirds (65%) of homeowners reported better physical health, according to the Greater Cleveland Habitat for Humanity’s homeownership impact survey. Some of that may be due to homeowners’ perceptions that they’re safer living in a neighborhood with other homeowners who take pride in their home and community.

Additionally, you’re not at the mercy of a landlord to fix a moldy vent, plumbing problem or a heater that broke down in the middle of winter. You can use your home equity to upgrade inefficient air conditioning, replace drafty windows or make home improvements so your home is as safe and healthy as possible for you and your family.