Wednesday, September 18, 2019 / by Heriberto Rodriguez
Let's breakdown the 5 major financial benefits of homeownership:
1. Housing is typically the one leveraged investment available.
Homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. A 20% down payment results in a leverage factor of five, meaning every percentage point rise in the value of your home is a 5% return on your equity. If you put down 10%, your leverage factor is 10.
2. You’re Paying for Housing Whether You Own or Rent
Some argue that renting eliminates the cost of property taxes and home repairs. Every potential renter must realize that all the expenses the landlord incurs (property taxes, repairs, insurance, etc.) are baked into the rent payment already – along with a profit margin.
3. Owning Is Usually a Form of “Forced Savings”
Studies have shown that homeowners have a net worth 44X greater than that of a renter. As a matter of fact, it was recently estimated that a family buying an average-priced home this past January could build $42,000 in family wealth over the next five years.
4. Owning Is a Hedge Against Inflation
House values and rents tend to go up at or higher than the rate of inflation. When you own, your home’s value will protect you from that inflation.
5. There Are Still Substantial Tax Benefits to Owning
“…the mortgage interest deduction is not the main source of these gains; even if it were removed, homeowners would continue to benefit from a lack of taxation of imputed rent and capital gains.”