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Benefits of Home Ownership

There are numerous choices when considering where to live, but the major financial decision is a choice between renting and owning. Homeowners make a great financial investment, enjoy tremendous savings over renters, and can improve their credit by using their mortgage responsibly. Because of the numerous benefits of owning a home, it is advantageous to own rather than rent.

Home ownership creates value. When you have a home loan (also known as a mortgage), your payments on this loan partially go toward paying off the principal balance of the loan. This amount adds to the equity that you own in the house. Home ownership also leads to a benefit if the value of the house increases over time. This is referred to as capital gains. When you sell your home, you receive the difference between the sale price and the principal balance of the mortgage. Thus, any increase in value while you own the home, plus any amount of the mortgage that you have paid off while owning the home, becomes yours at sale. Renters, on the other hand, could not be entitled to these benefits.

Home ownership also creates an excellent opportunity for savings. The federal tax code creates a great incentive for owning a home. The interest on your home mortgage is tax deductible. This is a substantial benefit, particularly in the early years of a mortgage, when a larger percentage of your mortgage payment represents interest portion of the payment as a whole. Renters cannot deduct any of their rental payment on their tax returns. Thus, comparing home ownership with renting, for the same monthly payment, the homeowner could receive a substantial savings over the renter, in the form of a tax return.

Also, home ownership is a great opportunity to establish good credit. A mortgage is, for most people, the largest loan that will have during their lives. By establishing a home loan and paying it regularly and on time, you can prove that you are capable of paying bills responsibly. Thus, home ownership can allow a person with average credit become a person with good or excellent credit. And if you have poor credit, responsible home ownership will improve your credit rating substantially.

There are costs associated with buying and selling a home, so it may be necessary to remain in the home for some time to fully realize all the benefits. But if you are planning to live in one place for the foreseeable future, it is advantageous to own a home.

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