June is National Homeownership Month and to help celebrate the whole month through, we’re reviewing the undeniable benefits of owning your own home. Low mortgage rates are currently fueling record mortgage applications as Americans are realizing the value of a home, bolstered by greater buyer power. Californians also have the opportunity to be gifted a free down payment through the state’s GSFA Platinum Program.
Everyone’s situation is different and unique, but if you’re ready to stop renting and purchase a home of your own, conditions are currently ideal for homebuyers. For those still on the fence about homeownership, let’s review some of the most important and undeniable benefits it brings to individuals and families.
1. Homeownership Builds Personal Wealth
Building wealth is a big reason why owning a home is a part of the American Dream! Owning a home is a financially smart investment because it helps individuals and families build their personal wealth over time, unlike renting. In fact, the net worth of a homeowner is over 44 times greater than that of a renter. These stats come from the latest Survey of Consumer Finances conducted by the Federal Reserve covering 2013-2016, which revealed that the median net worth of a homeowner was $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 compared to $5,500 in 2013).
2. Your Mortgage Is Like a Forced Savings Plan
Homeownership helps build your personal wealth by building equity. Paying your mortgage every month reduces the amount of your principal, creating a forced savings plan. Each month you are building up more valuable equity in your home. So in a sense, you are being forced to save—without even having to think!
Whether or not you own a home, you are already paying a mortgage each month. Why not make it your own?
3. Educational Benefits
Homeownership even has a significant positive impact on educational achievement. Children of homeowners tend to have higher levels of achievement in math and ready, and lower drop-out rates. The savings that homeowners gain in homeownership, along with the stability it provides, can have a positive effect on your children’s outcomes.
4. It Builds Happiness
There is an undeniable sense of satisfaction and accomplishment that comes from owning your own home. And it’s a fact that homeownership can enhance psychological health, happiness, and well-being for families and their surrounding communities. According to a study from Bank of America, 93% of respondents said that owning a home made them happier than renting did.
67% of current homeowners also said that their relationships with family and loved ones changed for the better since owning a home including providing the family a sense of pride (47%), allowing them to entertain more (49%), and enabling homeowners to bring the entire family under one roof (24%).
5. Tax Deduction Benefits Each Year
Tax deductions reduce your total income for the year, which in turn reduces the amount of taxes you owe, adding up to hundreds or even thousands of dollars in savings! Although changes to the tax code in 2017 put limits on some of the tax deductions available to homeowners each year, there are still great savings benefits available.
- Mortgage interest deduction: Taxpayers who itemize on their tax returns can deduct home mortgage interest on the first $750,000 of debt ($375,000 if married filing separately).
- State and local tax deduction: Filers can deduct up to $10,000 in state and local taxes ($5,000 if married filing separately). If you are itemizing and are a homeowner, it’s worth doing the math!
6. Stable Monthly Payments
Rents will continue to rise, but once you secure a fixed-rate mortgage, you’ll pay exactly the same monthly amount for principal and interest until your mortgage is paid off. Property taxes or homeowner’s insurance can fluctuate and change your monthly payments, however that doesn’t happen nearly as often as rent increases. While owning a home can be expensive – especially in Southern California – it’s important to educate yourself on the top affordable places to live in LA County, Orange County, San Diego County, and the Inland Empire.
7. Setting Down Roots and Civic Participation
Buying a house connects people to a community as they settle into their new home, unlike renters who come and go every few years. Homeowners are more likely to volunteer in local community organizations, host block parties, or become involved in a local school, all of which can help create richer, fuller relationships within their community and a stronger sense of home.
If you’re ready to realize the longterm benefits of homeownership for yourself, contact a First Team Real Estate agent near you and can create a plan of action to achieve your real estate goals. Dreams don’t work unless you do!
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