Buying a house is a massive expense with many recurring costs and expensive initial costs. However, despite the costs, it presents you with many financial benefits and comes with the emotional appeal of owning a home. Looking at the key benefits to each will help you make an informed decision on whether to buy or rent. Below are several advantages of buying a home.
1. Allows You to Build Equity
Your home equity is the value of your home that belongs to you. It is the difference between the total cost of your home and the amount you owe. Your home equity grows as you pay down your home loan and your home’s value increases. It is a form of savings that you can use in the future if you need money. You can borrow against it to meet various needs, including buying a second home, which lets you build your property portfolio.
2. Help You Accumulate Wealth
Homeownership is a significant investment that could increase value over time and give you a considerable investment return. Unlike renting, purchasing a home allows you to invest in an asset for yourself instead of a property management company. This is applicable even when a structure depreciates because the land it sits on keeps appreciating.
3. Potential Passive Income
As earlier mentioned, purchasing a home is an excellent investment. It can earn you returns in several ways, considering it is something you have to commit to in the long term. You have a choice of renting it out in the future when you want to move out as a form of passive income. Or while still living in it and use the proceeds to help cater for the mortgage payments. This is impossible when you are paying rent as the money you pay is gone and cannot be used to secure an income or reinvest in the future.
4. Enjoy Tax Advantages
Homebuyers get to experience tax advantages that ensure you do not lose too much money on your investment. A negative gearing tax break is employed in Australia, which dictates that your interest payment and expenses associated with an asset are greater than their return. It means that although you have a positive cash flow and your house’s price appreciates every year, you may still be losing money. The tax break is essential if you are losing money and allows you to deduct the loss against other income like wages and salary. That means you pay less tax levied only on your net profit as opposed to your gross income.
5. Improves Your Credit Rating
There are several ways a home purchase can help you build a better credit history. First, using the money saved from the tax deductions. Second, keeping up with your monthly mortgage payments and paying them on time shows other lenders that you are a good debtor and have a low risk of defaulting on loans. A better credit rating means you can easily acquire future loans whether for buying a car, another home, paying significant expenses, or making home improvements.
Buying a home means familiarity and stability for many people. However, it requires the confidence that you will stay there for a few years because selling, buying, and moving is complicated. It is especially appealing if you are at a point when you are settled in your career and want to start a family. There is also the emotional appeal of owning a home that it is yours, and for some, this is priceless and may help them blend seamlessly into a community. Taking out a fixed-rate mortgage means you will have stable monthly payments that you can anticipate and budget. This is as opposed to renting, which may increase with every annual lease.
7. You Experience Personal Freedom
Buying versus renting gives you the freedom and flexibility to create the living environment you have always dreamed of without the need for permission or approval from a landlord. You can remodel, paint your favorite colors, add cabinets, change floors, and even own that dog you have always wanted. Knowing that you will be in that house for several years gives you the confidence to make it as useful as it can be for you.
8. A Secure Retirement Option
A home is an incredible nest egg as you not only have a place to stay during retirement, but you can also sell it and purchase something smaller and more convenient. Simultaneously, you can rent it all or a portion of it and maintain a steady income stream. Paying off your mortgage before retirement means living rent or mortgage-free later. Being a homeowner presets a lot of rewards despite the responsibilities. Investing in a home today gives you a roof over your head for the unforeseeable future.