by Christy Bieber | Updated July 19, 2021 - First published on Jan. 2, 2021
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Will you reap these benefits if you buy your own home?
Buying a home requires you to make some financial sacrifices so you can save up for a down payment and afford your monthly mortgage. In many cases, however, these sacrifices are worth it because homeownership brings significant advantages -- provided you're smart about the purchase you make.
Here are four huge benefits of owning your own place.
According to the Census Bureau, homeowners on average have a net worth that's 80 times higher than that of renters. Some of this is because people who are in a better financial position tend to be more likely to buy a home. But owning a home, in and of itself, can help drastically improve your net worth. In fact, as the Census Bureau also reveals, home equity and retirement accounts together account for over 60% of most households' net worth.
Homeownership builds wealth for two reasons. As you make your mortgage payment you acquire equity in your home -- and your home is an asset with value. When you pay it off over time, you end up owning it free and clear. That means you'll own an asset worth hundreds of thousands of dollars in the end. Renters, on the other hand, never acquire ownership so they simply keep paying month after month without getting richer.
The second reason homeownership builds wealth is because homes often go up in value. If you buy a home for $250,000 and it increases in value to $300,000, your wealth grows effortlessly without you doing anything. While you can't always count on this happening, many people see their property values increase substantially over time.
When your landlord owns your home, you're always vulnerable to your lease not being renewed at the end of your loan term. Your landlord could also sell the property or decide to convert your units to condos or co-ops that you'd have to buy if you wanted to stay. Or, your landlord could be foreclosed on and lose the property. In any of these scenarios, you might be forced to move when you don't want to.
If you own your own home, it's far less likely you'll be forced to leave it. While that could happen if you become unable to make payments, you have the ability to take steps to avoid that, such as saving up an emergency fund to cover the mortgage in case of a job loss.
In many parts of the country, there are few or no limits on how much your landlord can raise your rent. And rent increases are common over time, which means your housing costs could keep going up from year to year.
When you own your home and have a fixed-rate mortgage, you shouldn't need to worry about this. Your payments will remain the same for the life of your loan, so your housing costs shouldn't go up.
As a homeowner, you can do what you want with your property (as long as you don't violate zoning laws or homeowners association rules). That means you can customize your house to suit your needs. Landlords generally have restrictions that prevent you from doing that -- and even if they don't, it wouldn't make much sense to spend a lot of money improving property you don't own.
While this may not be the most important reason homeownership can benefit you -- that would likely be the wealth-building powers ownership can have -- it may have a big impact on how much you're able to enjoy your property on a daily basis.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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