Best Savings Plan Out There? Homeownership!

Dated: February 18 2020

Views: 49

The Overlooked Financial Advantages of Homeownership

The Overlooked Financial Advantages of Homeownership | MyKCM

There are many clear financial benefits to owning a home: increasing equity, building net worth, growing appreciation, and more. If you’re a renter, it’s never too early to make a plan for how homeownership can propel you toward a stronger future.  In fact, if your rent is north of $1,300/month, you could potentially own for the same payment each month.  Here’s a dive into three often-overlooked financial benefits of homeownership and how preparing for them now can steer you in the direction of greater stability, savings, and predictability.

1. You Won’t Always Have a Monthly Housing Payment

According to a recent article by the National Association of Realtors (NAR):

“If you’ve been a lifelong renter, this may sound like a foreign concept, but believe it or not, one day you won’t have a monthly housing payment. Unlike renting, you will eventually pay off your mortgage and your monthly payments will be funding other (possibly more fun) things.”

As a homeowner, someday you can eliminate the monthly payment you make on your house. That’s a huge win and a big factor in how homeownership can drive stability and savings in your life. As soon as you buy a home, your monthly housing costs will begin to work for you as forced savings, coming in the form of equity. As you build equity and grow your net worth, you can continue to reinvest those savings into your future, maybe even by buying that next dream home. The possibilities are truly endless.

Appreciation is another aspect of homeownership that helps build wealth for the average American faster than any other investment vehicle, including 401ks.  In central Texas, you can expect 6-8% annually, or higher based on the past ten years.  No guarantees, but my newest client is banking on that appreciation, literally.  From Alberta, she has researched the United States for real estate investment opportunities, and came to the conclusion that Austin is THE place she will be investing.  

A little studying on your own (articles like this one included), and you will see the overwhelming financial advantages of owning versus renting.

2. Homeownership Is a Tax Break

One thing people who have never owned a home don’t always think about are the tax advantages of homeownership. The same piece states:

“Both the interest and property tax portion of your mortgage is a tax deduction. As long as the balance of your mortgage is less than the total price of your home, the interest is 100% deductible on your tax return.”

Whether you’re living in your first home or your fifth, it’s a huge financial advantage to have some tax relief tied to the interest you pay each year. It’s one thing you definitely don’t get when you’re renting. Be sure to work with a tax professional to get the best possible benefits on your annual return.

3. Monthly Housing Costs Are Predictable

A third item noted in the article is how monthly costs become more predictable with homeownership:

As a homeowner, your monthly costs are most likely based on a fixed-rate mortgage, which allows you to budget your finances over a long period of time, unlike the unpredictability of renting.”

With a mortgage, you can keep your monthly housing costs steady and predictable. Rental prices have been skyrocketing since 2012.  In Austin, rent has increased 98% over the past ten years.  If you owned during that timeframe, you would be paying the same in 2020 monthly as you did in 2010.  (What was YOUR rent in 2010 versus today?) With today’s low mortgage rates, it’s a great time to get more for your money when purchasing a home. If you want to lock-in your monthly payment at a low rate and have a solid understanding of what you’re going to spend in your mortgage payment each month, buying a home may be your best bet.

Bottom Line

If you’re ready to start feeling the benefits of stability, savings, and predictability that come with owning a home, research further and determine whether you should or should not move forward.  Each family's situation is unique.  However, for the overwhelming majority, homeownership is the wisest financial decision you will ever make.  Questions? I'm happy to assist in any way you need.  Happy Hunting!

Blog author image

Tim Edwards

Tim is a Licensed Realtor working throughout the Greater Austin-area. In his role, Tim specializes in residential real estate, working with clients throughout the buying and selling process. In addit....

Latest Blog Posts

The Rental Hamster Wheel

Great News for Renters Who Want to Buy a HomeRents in the United States have been skyrocketing since 2012. In Austin specifically, rent has inreased 92% in the past ten years, far outpacing any

Read More

Are you female? You May Be Losing Out When Buying or Selling Your Home.

How to Avoid a Gender Gap When Investing in the Housing MarketWhen buying a home, we all want to feel like we’re making the right decision, paying a fair price, and making the best

Read More

Grandma's Not Moving!

Does “Aging in Place” Make the Most Sense?A desire among many seniors is to “age in place.” According to the Senior Resource Guide, the term means,“…that

Read More

Economic Uncertainty Often Impacts the Real Estate Market POSITIVELY!

How the Housing Market Benefits with Uncertainty in the WorldIt’s hard to listen to today’s news without hearing about the uncertainty surrounding global markets, the spread of the

Read More