Transitioning from renting to owning is a major milestone in an individual, couple or family’s life.
Tenants buying a home get a sense of stability, freedom and the ability to change or remodel your home without being tied to someone else’s requirements.
None the less, if you have been renting for a long period of time you might find yourself relatively apprehensive to take such a large step in your financial and personal life. Without a doubt you’ve had friends and family all sharing stories and giving you advice on what to do when transitioning; it can be so overwhelming! This is all completely normal, but the idea of moving from renting to owning doesn’t have to be scary and can be incredibly rewarding!
We have included four key points every tenant should know before buying a home to help ease your mind and start you on your journey to homeownership.
1. Tenants Buying a Home Can Build Equity
Every month you paid your rent you were building equity…for your landlord.
When you decide to buy your own home you are flipping the script and in turn building your own equity. If you are new to the real estate market you might ask yourself why this is important for you. The answer is simple, equity is your own personal asset and when you are talking about a home with the value of $100,000 or more it is quite a substantial asset.
As you pay off your mortgage you are in turn building your equity. If the real estate market is in a very favorable condition as it has been in recent years, the stake you have with the home’s equity can increase as the value of your home increases. As you become more comfortable in your home and decide to make renovations, add on or perform routine maintenance you are also improving the quality of your home and increasing your equity or investment.
If you have built up a ton of equity you can cash in your home asset for another asset. Say you’ve paid off your mortgage, renovated your kitchen and decide to sell while the market is hot. You can use the equity in your home and apply it to another home to shave off money owed on a new loan or simply get cash for your equity.
2. Mortgage Interest Can Be Tax Deductible
If you have resisted buying a home because you think the initial and reoccurring costs are too much for your budget think about tax season and the possible deductions you will receive because you are a homeowner.
The beauty of the interest you have on your mortgage is that it ca be tax deductible! If you have a mortgage with a value that is smaller than the price or value of your new home you are eligible for a mortgage interest deduction. Along with charitable donations, deductions for dependents and even a new marriage deduction you will find yourself with a quite a bit of money back that can be applied to your loan or to home improvement projects to boost your equity.
As a new homeowner you could also receive property tax deductions in the amount paid in the relevant tax year. This can be another wonderful addition to tax breaks and deductions you will experience as a first-time homeowner.
3. Planting Your Roots is Incredibly Rewarding
Perhaps one of the most important aspects of owning a home is simply starting your life in a more permanent location! Once you have chosen the home of your dreams you can start exploring the city you’ve chosen and plant your roots. Owning a home provides a sense of stability. You are living in your own personal asset and have probably chosen the area because of favorable school districts for your children, a shorter commute to work or simple LOVE the area where your new home lies.
Whatever the reason, you are now a part of a greater community where you can meet new people, share in new community experiences and have a greater sense of ownership.
4. No More Landlord!
This might sound silly, but living under the thumb of a landlord can be exhausting.
When you own your own home you can do whatever you please with the interior! Paint the bathroom blue, break down the wall between the kitchen and living room to add more open space, build bunker in the backyard or simply landscape how you choose! The freedom is huge, and having a sense of personal pride can really translate into your home.
The beauty of owning your own home is making it your own space. You can make adjustments as often as you want without having to worry about losing a security deposit or having a landlord visit with steam coming out of his ears after you’ve hung a family portrait with nails instead of sticky tape.
Every tenant should know and understand that they are not only making an investment in their lives by owning a home but are also providing a sense of freedom and stability for themselves and their families.
Owning a home doesn’t have to be scary, complicated and stressful! It is a rewarding experience that will pay you back over and over again with time, commitment and educated decisions.