Homeownership is a major investment, and can be prohibitively costly for many individuals. However, younger buyers are often looking to make concrete financial investments that they can physically see, rather than playing the ephemeral stock market. For such investors, owning a home can be a great way to start accumulating assets, while also being a very practical place to live, for several reasons. Here are a few of the top financial benefits according to a leading financial advisor in NJ:
- Think of housing payments as investments. If a person was renting their living space, the money would simply be gone after the rent check was cashed. However, when paying off a home loan or a mortgage, that money goes towards buying an investment—the property. Furthermore, interest rates on mortgages are some of the lowest interest rates in the market, so keep hard earned money in these investments, and take out a loan to pay for the home. Assuming the investments earn more than the loan interest costs, the homeowner is already making money.
- Cost-efficient appliances are often much harder to find when renting a space, which means that utility bills will frequently be much higher than they would be if the tenant was allowed to supply their own appliances. In a home, there is no need to ask a landlord for permission to renovate, and there is no coin laundry, either! (See tip number seven on this list as well, for added benefits of owning personal laundry and kitchen appliances)
- Owning a home can even improve credit scores. It shows lenders that the potential client is financially responsible enough to accumulate enough capital to purchase a house and maintain it successfully. As the credit score improves, homeowners can even consider refinancing their homes at significantly lower interest rates.
- Once the house is purchased, homeowners are also more competitive loan applicants. With a proven track record of making on-time payments, homeowners can prove their credit-worthiness and may even qualify for a home equity loan. They will also qualify for more competitive mortgage rates (See tip eight to learn more about the possibility of using a reverse mortgage to supplement retirement income, as well).
- A home can be a very profitable investment. Even if a house requires some maintenance or renovations, the time and energy put into its upkeep will often make it more appealing for potential buyers. They will see the house as a desirable asset and investment piece, and will help to get a return on the investment by buying it from the owner!
- Homeowners also qualify for better car insurance rates. While purchasing a home will not affect a person’s driving record, many car insurance companies do offer discounted rates to homeowners, as it is indicative of being a responsible client and a person who will make their monthly payments on time.
- Homeowners qualify for significant tax breaks. Up to $100,000 worth of interest paid on home loans is tax-deductible, and so are property taxes. Even certain home improvement efforts, such as installing solar panels or purchasing energy-efficient appliances can qualify buyers for up to $500 worth of tax credits. In essence, this will make energy-efficient appliances much more affordable since there are tax incentives.
- For those who are nearing retirement age but have not yet accumulated enough income to comfortably retire, consider applying for a reverse mortgage. Essentially, a homeowner will sell equity in their home and will receive monthly payments in return. People often apply for and qualify for reverse mortgages if they need money to supplement their retirement income.
- To put it simply, buying is far cheaper than renting.
- Though this last fact is not financial, it bears repeating. Homes belong to the homeowner and not some landlord. The homeowner has control over who renovates the home and when, as well as who maintains the home and the amenities in it.
Homeownership can be a challenge, but it is incredibly fulfilling and utterly worth the investment. For those considering buying a home versus renting an apartment, condominium, or even a house, keep these benefits of homeownership in mind. For additional questions, contact a New Jersey financial advisor who can further explain these benefits and many more.