DESPITE the property market’s 2006–12 downturn, many Americans remain firmly convinced of the virtues of homeownership. What underpins that faith? Here are five reasons most folks should aim to own a home.
First, with a fixed-rate mortgage, you lock in your housing costs and thereby protect yourself against a booming real estate market that drives up rents and property prices. An adjustable-rate mortgage doesn’t offer the same degree of certainty, though typically there are caps on how much your monthly payment can increase.
Second, as you pay down your mortgage, you come to own a valuable asset outright. Think of a mortgage as forced savings, with a portion of every monthly payment going toward reducing your loan’s principal balance.
Third, once your mortgage is paid off, you eliminate a major expense, making it easier to retire because you can now live “rent-free.”
Fourth, home prices historically have increased slightly faster than consumer prices, thus acting as a hedge against inflation. Inflation also effectively trims the cost of your mortgage, because it allows you to pay off the loan with dollars that are less valuable.
Finally, Congress has showered homeownership with tax breaks. You can deduct your mortgage interest and property taxes, though both those deductions are now less generous, thanks to the 2017 tax law. Up to $500,000 of your home’s price appreciation may be tax-free when you sell. There’s also a less obvious advantage: If you rented out your home, you would have to pay taxes on the rent you receive. But there’s no tax owed when you rent to yourself.
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