Buying a primary residence and dealing with the many faces of real estate investing
There are several ways to invest in real estate. In this article, we will explore investing in a property to be used as a primary residence. There are many benefits of home ownership and we have selected what we think are the best, both psychologically and financially.
Be The King Of Your Castle
To many people, the ultimate feeling of freedom and control is to own the residence they live in. Nobody can tell you how to live in your house.
If you decide to keep the AC set at 59 degrees, you can do that without anyone else’s permission. Well maybe with the exception of your significant other that is. If you decide that you don’t need an alarm system, you don’t have to have one.
However, this does bring up another side to this coin. If you decide not to have an alarm system, or to not pay for insurance, if the house gets burglarized, or gets struck by lightning, you could be left paying for the repairs out of pocket. As the property owner, these would be your decisions to make.
Contact us on exploring insurance costs through our financing resources. There surely is a higher level of responsibility for a homeowner than a tenant. It is important to be certain that you can afford all the expenses related to home ownership. Would you like to calculate your mortgage payments? Visit our “calculator” page here.
Mortgage Interest Deduction
One of the many benefits of home ownership is being able to deduct interest paid on mortgages. One way the IRS helps U.S. homeowners is by allowing some interest paid on mortgages to be deducted from income for tax purposes. That way some of the money that gets paid to the mortgage company is “saved”.
An individual can currently deduct interest paid annually on debt up to $375,000.00 for an individual, or $750,000.00 for a married couple. There is a higher interest deduction limit of $1,000,000.00 per married couple for debts that were incurred prior to 12/16/17.
Having A Mortgage Makes Improving One’s Housing Situation Much More Practical
Part of the “American Dream” is the ability to improve one’s life situation. Imagine if you didn’t qualify for a mortgage and had to purchase a house using only whatever cash you had saved.
For most people, that would seriously limit the houses you could afford to purchase. Some loans require little or no money down at all. This makes the amount of cash you might have available for a down payment would hardly matter. If the mortgage you are looking for requires 20% of the purchase price as a down payment in cash, that means if you were interested in a $100,000.00 house, you would be required to put up $20,000.00 as a down payment.
If you didn’t have the option to finance the purchase of the house through a mortgage, you would be limited to a house that costs no more than $20,000.00. A mortgage gives the homeowner the ability to pay for a nicer house than they could otherwise afford. This is accomplished by paying for it over time. Fill out an application and find out what mortgage programs you qualify for! Go here to fill out an online application.
Increasing Property Value (Appreciation)
Another benefit of owning your own house is that property typically increases in value over time. Physical buildings on a property “decrease” in value over time through use. The cost of land typically increases in value over time, since the supply of land is finite.
The number of people on earth has historically increased whereas the amount of land has stayed the same. It’s all about Supply and Demand. If there is less of a supply of land, then the demand is higher, and therefore the prices as well. Although it will cost some money to keep a property in good condition and well maintained, one can expect the overall value of the property to increase over time.
Forced Savings Plan
One of the key benefits of home ownership is having a savings plan working for you that you probably weren’t aware of. Having the structure and requirement of making a monthly mortgage payment assists people in their savings goals. This is the result of the monthly mortgage payments being required to keep your mortgage in good standing. Those payments work as a type of forced savings program.
Yes, you have to make the payments, but with each payment made you are increasing the amount of equity you have in the house. If your monthly payment shows $120 going to principal, then that means now you own $120 more of the house than you did prior to that payment.
You can save more or less depending on your situation. You can pay it off faster or slower, as long as you make the minimum payment. If at some time you need to access some money, you will be able to “Refinance” if you have equity in your house. Visit our loan programs page to see what options would work best for you.
No More Rent Payments
One of the best reasons to buy a home is to stop paying rent, and instead, pay down your mortgage. When you make your mortgage payments not all of that money disappears down a “Rent” black hole. The amount paid to principal is the amount the loan balance is reduced by, and your equity (the part you own) is increased by.
For most mortgages, the amount going to principal will increase with each made payment, as the principal balance the interest is based on decreases. With each mortgage payment, you are one payment closer to having it paid off. Once it is finally paid off, all that money that used to be spent first on rent, and then on a mortgage, will be able to be saved.
Another problem with paying rent is that it is subject to change. It is a common practice to increase rental amounts for tenants when they extend their lease.
This is something else an owner can avoid by owning their own property. Although your taxes may go up or down, you will never be at the mercy of a landlord asking for more in rent.
This list was intended to summarize some of the main benefits of home ownership. While careful thought and preparation are required to make sure a purchase is the right decision for you, the benefits mentioned above are well understood to be beneficial to a consumer.