When it comes to purchasing a home, some common reasons for a purchase include needing larger rooms or more space, wanting extra additions like a pool or garage, or wanting an upgrade without having to put the work in. While all of these are common motivators for purchasing a new home, other things to take into consideration include adding to your overall net worth, the tax benefits that owning a home offers, and the equity you build from owning a home. Although these might be less common, they are important ones to consider for your long-term financial health.
1. Net Worth
The purchase of a home is often one of the largest and most valuable purchases you’ll make. Over time, the value of your home is likely to increase, resulting in an increase of your net worth. Your net worth can be determined by subtracting your assets against your liabilities. According to Forbes Advisor, “Homeowners have a net worth that is more than 40 times greater than their renter counterparts, which reinforces the idea that owning a home is a smart financial move”. In addition, making improvements or updates to your home can increase your home’s value, which also results in an increase in your net worth.
2. Tax Breaks
Did you know you could be eligible for tax breaks just by becoming a homeowner? Tax breaks are offered by the government and can help you save more money on your taxes simply by owning a home. Some of the more common tax breaks involving homeownership include mortgage interest tax deductions, mortgage tax credits, and home sales tax exclusions. Connect with a certified tax professional for more information on tax breaks, eligibility, and how you can benefit from one.
3. Building Equity
Owning a home can also help you build equity. What you owe on your mortgage and what your home is worth helps determine the amount of equity you have in your home. Your equity is the portion of the property value that you can claim from making payments on the home. For example, if you decide to sell your home and purchase a new one, the more equity you have, the more cash you will receive from the sale. When your home increases in value, the equity in your home also increases. Your down payment can also help you build equity in your home. A larger down payment helps you start earning equity in the home sooner than a smaller one. Additionally, as you make payments on your mortgage and the principal amount you owe decreases, the equity you have in your home continues to increase.
Although there are many reasons to purchase a new home, like putting roots down in a city and pride of ownership, you can also consider it an investment. The purchase can help you add to your overall net worth and save money with exclusive tax breaks. If you’re interested in purchasing a home through First Bank Mortgage, connect with a First Bank Home Loan Advisor near you.