As a renter considering your first home purchase, you're probably weighing the impact on your finances. As real estate professionals, we can tell you that there are plenty of benefits for people who want to buy a house in Atlanta and make the transition from "tenant" to "buyer!"
Many people say that owning a house is an investment, and it can appreciate value over time. Still, there are also many other financial benefits of owning a house that you should consider when deciding if it's right for you. Today our Atlanta property management team talks about the top six financial benefits of owning your own home.
1. Build Personal Wealth Over Time
Owning your own house builds wealth over time. Even when paying a monthly mortgage, your property appreciates in value year after year. However, a monthly rental payment doesn't leave you with ownership over the home or add to your long-term wealth. If you were to invest the money paid in rent every month into payments toward a home you own, you could be adding to your net worth instead.
2. Build Equity Every Month
Not only does owning a house build equity and wealth over time, but it also allows first-time homebuyers to build equity through their monthly mortgage payments. The money paid towards the principal of your home loan every month increases your equity while decreasing the principal remaining compared to when you first purchased your home.
In addition, increasing your equity improves your credit and reduces your debt-to-income ratio on your FHA or VA loan. Owning more of this asset month-by-month improves your overall financial picture long-term! Think of it as a long-term forced savings plan that builds equity month by month.
3. A Mortgage Deduction For Your Taxes
The mortgage deduction portion of tax season was created because homeowners pay off their property's value each year through their annual tax bill. You can write this deduction off on your taxes so long as you own your Atlanta, GA home!
If you're not sure that this deduction is a worthy financial benefit, consider that most people own Atlanta homes for an average of eleven years with mortgage payments during those years. That means you could take advantage of this deduction and reduce your tax payout for a decade or more!
4. Tax Deductions on Home Equity Loans
Does your home need a few improvements? As long as you use funds from a home equity loan to pay for upgrades and renovations on your house, you can also deduct the interest from that loan on your taxes.
Why is that considered a critical financial benefit of homeownership? When renting, your landlord covers the costs for repairs and renovations to the property you live in. However, as a homeowner, you become responsible for all repairs, maintenance, and upgrade expenses. By taking out a home equity loan and using those funds for home improvements, you reduce your out-of-pocket costs by deducting the loan's interest at tax time. This means you add value to your house at a lower overall cost, and that's a significant financial benefit!
5. The Capital Gains Exclusion
The equity you build in your Atlanta area home adds to its overall value. If you sell the house in the future, you can qualify for a capital gains exclusion on any profits earned in the transaction.
Capital gains tax is the difference between the sale price and your basis in the house. According to the IRS, this is the purchase price plus the cost of any capital improvements you made while owning the home. This means that several years down the road, when you sell your home for $275,000, and your basis in the property is $250,000, you'll have a capital gain of $25,000. However, since the $25,000 is lower than the $250,000 exclusion allowed for single taxpayers, your capital gain is "excluded" or tax-free.
6. Being a Home Buyer is Cheaper Than Renting Long-Term
Looking toward your long-term financial future, owning a first-time home is less expensive than renting long-term. In many cases, buyers can qualify for a conventional mortgage with lower monthly payments than their current monthly rental payments. When renting, your property owner determines how much they want you to pay to live in their property. When buying your Georgia dream home, you have more influence over your monthly housing budget and the factors determining the type of loan and rates you qualify for to reduce monthly payments.
Plus, instead of putting money into the pocket of someone else who owns the home you live in, your monthly mortgage payments, home improvements, and ultimately the sale of the house down the road is money in your pocket!
Your Property Manager Can Help You Become a Homebuyer
We hope the financial benefits of owning a home sound pretty good! If you're considering leaving your renting days behind and buying your first home, Revolution Rental Management can help. We help owners and renters buy and sell Atlanta real estate. Reach out soon to learn more about how we can help with homebuyer education!
Learn more about the benefits of buying a house! Download our free ebook, "The Hidden Benefits of Home Ownership for Current Renters."