How Owning a Home Can Make You Money
For most people, buying their first home is a major milestone in their lives, but it can also be a confusing time full of difficult decisions.
For new homeowners, the commitment of buying a house can seem like an insurmountable task when it comes to considering finances and planning a budget, but investing in real estate can actually be a money-making tool for many first-time homeowners using these simple tips and tricks.
Save Up for a Down Payment
For first-time homeowners, saving up for a down payment may seem like an impossible task in the current economic climate, but making a larger initial down payment will end up saving you money in the long run.
With average mortgage interest rates of 4.21% for a 15-year mortgage and 5.09% for a 30-year mortgage, making a larger payment upfront will help to lower the overall amount of interest accrued over time, saving homeowners thousands of dollars on interest charges.
Start Small, Think Big
Most people have plenty of ideas when it comes to what special features their dream home would have, but for most people like young professionals or newlywed couples, buying their dream home right off the bat is not usually a realistic scenario.
Even for first-time homebuyers who are not able to afford their dream home in the beginning, investing in real estate is generally much cheaper than renting property and it allows homeowners to start building equity that may become useful for future renovations or upgrades.
Saving Money on Monthly Rent
As rental prices for apartments continue to rise, having a monthly mortgage payment is often cheaper than paying for a rental property.
Although homeowners may encounter more costs when it comes to dealing with home repairs, living within your means, and purchasing a home that has just the right amount of space for you and your family, you can save money each month, bringing you one step closer to financial freedom.
Owning a Home Outright
Because buying a house is so expensive, most homeowners cannot afford to pay for their homes without a mortgage. Mortgages are homeowners who can pay off their mortgage early by making additional payments towards what is owed for their monthly mortgage payment.
By using an online mortgage calculator, homeowners can see how much money they will be saving in interest fees by adding even just a few extra dollars to their payments each month. Skipping that daily Starbucks run can bring homeowners one step closer to financial independence.
Turn Your Mortgage into Cash
For homeowners who have at least 50% equity in their home, applying for a reverse mortgage loan is a quick and easy way to get some extra cash. The way this works is that a mortgage company takes part of the equity in your home and converts it to cash payments to the homeowner.
These payments are typically tax-free and act as an advance on equity accrued over time. Homeowners can use an online reverse mortgage calculator to see what rate they would get and there are dozens of companies to choose from that offer reverse mortgage loans.
Tax Benefits of Owning a Home
When filing taxes, homeowners may qualify for certain tax deductions on mortgage interest, property taxes, and more. Additionally, owners investing in energy-efficient improvements are eligible for certain federal tax breaks or credits like the federal residential solar energy credit for homeowners that install solar energy panels for their homes.
Additionally, homeowners receiving rental income from homes are entitled to certain tax deductions on annual taxes and while rental rates may change due to inflation, mortgage interest rates will not. Homeowners utilizing their real estate as rental properties can increase their cash flow by charging renters a monthly fee that is greater than their monthly mortgage payment. That money may in turn be used or set aside for any repairs or renovations to the home.
Home Value Appreciation
Although prices of real estate in the housing market can fluctuate greatly, homes typically gain value as time goes by. Home appreciation is the term used to describe a real estate investment increasing in value over time. Homeowners can make a profit from selling their property to new owners or earning more income through monthly rent payments made by tenants.
Mortgage Pay Off
One of the most rewarding aspects of owning a home is having the mortgage entirely paid off. For homeowners in it for the long haul, paying off a mortgage is the ultimate way to achieve financial freedom. Although paying off a home mortgage takes thirty years on average, once it has been fully paid off, homeowners will have the satisfaction of owning their home outright without having any additional payments to make aside from general maintenance or renovations.