Benefits Of Home Ownership

Home ownership has its benefits, a quite a lot of them, at that. The following are several of the key benefits of home ownership.

Investment Value

Statistics collected by such organizations as the Office of Federal Housing Enterprise Oversight has shown that real estate, though in moves cyclically up and down throughout the years, maintains a consistent trend of appreciating in value over the long run. Homeowners tend to consider their homes their primary investment and a hedge against annual inflation.

Tax Benefits

Tax rates encouraging home ownership make owning a home an excellent tax shelter.

Mortgage Interest Deduction: Take a look at any monthly mortgage statement and you’ll see that the largest portion of your monthly payment applies towards mortgage interest. Provided that the balance on your mortgage is less than the purchase price of your house, that mortgage interest you pay is completely tax deductible. According to IRS Publication 530 property taxes on a first home (as well as a vacation home) are also completely deductible from your income taxes.

Capital Gains Exclusion: If you remain in your home for at least 2 out of the previous 5 years, you are eligible to exclude as much as $250,000 (for individuals) and $500,000 (for married couples) of your capital gains profits, without requiring you move up or purchase a replacement home, and without any age restrictions. Every 2 years you’re allowed to exclude these thresholds from your taxes, so you could conceivable sell your home every 24 months and pocket all the profits without being taxed on any of it (with certain limitations).

Preferential Treatment: Upon the sale of your home, and so long as you’ve owned the home for at least a full year, if you make more than the permissible exclusion in profits, the amount is taken as a capital asset and is given preferential tax treatment.

Equity

Every month, a portion of your monthly mortgage payment is applied towards your loan’s principal balance, thereby reducing your loan obligation. Based on the rules of amortization , this portion applied to principal increases each and every month. The more principal you pay down, the more equity you have in your home to borrow against. You can then use this for emergencies, renovations and home improvements, and other purchases. Having equity in your home also makes you more creditworthy, in other words: more able to be approved for credit (whether a credit card, a refinance, or a new loan).

Pride

Lastly, not enough can be said about the pride of home ownership. Unlike when you rent your residence, you have a sense of security, stability, and empowerment to do whatever you want in and with your home. You can’t put a price on that.