Why home ownership

Help Center. Main Start Your Application Online. Why Home Ownership is Good for Everyone. The Importance of Homeownership For many people, owning a home represents the stability, independence and freedom of reaching adulthood. Benefitting a Community Homeownership also helps to improve the areas surrounding individual homes.

These funds are used for infrastructure services and projects including: road repair construction of schools library operations police and fire protection snow removal parks and greenways government social services other enriching infrastructure projects. Did you know? Find Out More. Related Article. Home Ownership Advantages of Homeownership. Main Start your application online or give us a call. When you pay it off over time, you end up owning it free and clear.

That means you'll own an asset worth hundreds of thousands of dollars in the end. Renters , on the other hand, never acquire ownership so they simply keep paying month after month without getting richer.

The second reason homeownership builds wealth is because homes often go up in value. While you can't always count on this happening, many people see their property values increase substantially over time. When your landlord owns your home, you're always vulnerable to your lease not being renewed at the end of your loan term. Your landlord could also sell the property or decide to convert your units to condos or co-ops that you'd have to buy if you wanted to stay. For the first few years, most of each payment goes toward interest.

Over time, however, you pay back more of the principal than the interest. And the more you reduce the principal, the more equity you have in your house. Some loans let you make extra payments toward your principal each month. That reduces the term of your loan the number of years you have to make mortgage payments and builds your equity faster.

By increasing the value of your home. If your home is worth more now than it was when you bought it, your home gains in equity. The value of your house increases under two circumstances: when housing prices go up as a result of market conditions and when you make improvements to your house because improvements may put your house in a higher price bracket.

These two factors usually work in tandem. Housing prices can also decrease —as they did in many areas of the U. Normally, when you profit by selling an investment, you have to pay a capital gains tax on that profit. But when you sell your home, Uncle Sam gives you a break. That means that when you sell your home, you only have to pay capital gains tax on any profit over those amounts. You can put it to use right away by borrowing against it through either a home equity loan or a home equity line of credit HELOC.

It also means that you now have two loan payments to make each month. With a home equity loan, you borrow a fixed amount of money, usually at a fixed interest rate. You repay the loan over a set period of time, just as you do a mortgage. In fact, this kind of loan is sometimes called a second mortgage.

Homeowners often use home equity loans to pay for a single large expense, like adding a room or remodeling a kitchen. For this type of loan, lenders extend you a line of credit based on your equity rather than giving you a lump-sum payment. Taking into account the amount of equity you have in your home, the lender establishes a maximum line of credit and gives you a book of checks or a special credit card that lets you draw on that credit.

Lenders call the first 10 years the draw period. You can pay back some or all of what you borrow during the draw period, or you can make interest-only minimum payments. After the draw period, your borrowing privileges end. HELOCs usually have an adjustable interest rate. That means that the interest you pay goes up and down in conjunction with an established financial index, such as the prime rate the interest rate lenders charge their best customers for loans.

When that period expires, however, your interest rate can change quickly. Your payments also fluctuate depending on how much money you borrow. Check with your accountant or tax adviser to find out how much home equity loan interest you can deduct. Uncle Sam loves homeowners—and shows you how much by giving you a break on your income taxes.

Certain costs related to buying the home, such as points you paid see Points. Of course, tax laws change frequently, and not everyone qualifies for each deduction. Check with your accountant or tax preparer to find out how homeowner tax breaks can best benefit you.

Over the short term, the real estate market can fluctuate significantly. Home prices can leap up one year, drop sharply the next, change a little, or stay flat. In fact, the real estate market can be so volatile that if you plan to stay in your house for just a couple of years, renting may be a better option.

Aside from the down payment on the house Chapter 6 , you have to pay a long list of other charges and fees to get financing and to transfer legal ownership of the house to you Chapter 9 outlines these for you.

The longer you live in the home, the more those initial costs are spread out over time, reducing their impact.

Finally, lenders calculate your repayment schedule so that, for the first few years you pay back the loan, a much bigger chunk of each monthly payment goes toward interest rather than principal. Unless you take out a shorter-term mortgage Shorter Term or Longer Term? As time goes by, the principal part of your payment increases slightly every month year after year. Each payment you make brings you closer to owning more of your home and owing less, a opposed to paying rent where you will own nothing at the end of your stay there.

Aside from the apparent stability of settling on a place to live and not having to worry about moving anytime soon, owning a home provides social stability.

People who own homes are more likely to be involved in their community and build relationships with other people in the community, providing them with a solid foundation upon which to build their lives. These statistics are pretty staggering, and prove that owning a home can help set your children up for a successful future.

Forcing you to save. Paying a mortgage every month and reducing the amount of your principal is like a forced savings plan.

Each month you are building up more valuable equity in your home. This equity is essentially part of your net worth, so in a sense, you are preparing for your future without having to think about it too much. Someday you will have a piece of property that you can sell for profit, rent out, or reap the benefits of living without a monthly mortgage or rent payment in.

Building a strong credit history. As long as you are consistently making your monthly loan payments on time, you are demonstrating to other lenders that you are a good borrower and the risk of you defaulting on a loan is small. This helps to build your credit, which can be helpful in the future when you may need other loans for buying a car, remodeling your home, or paying other major expenses.

Many renters have rules against pets, the color you can paint rooms, or changes you can make to the appearance of your house.