The benefits of buying your own home

This was originally published on Monday, July 10, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Purchasing a home is one of the biggest financial decisions you will make in your life. It’s important to consider how buying a home will affect your finances and lifestyle before making the purchase.

When you think about purchasing a home, think about the following:

  • Do I really need to buy a home?
  • Is my income going to grow?
  • Will I stay in a home long enough to benefit from the purchase?
  • Do I have enough money saved?
  • Am I ready for the responsibility?

Homeownership can be a one of the greatest financial rewards. Here are some of the advantages:

  • Predictable monthly payments. Depending on the type of mortgage, you could have the same monthly payment for the length of your mortgage. Landlords can raise your rent at the end of a lease. If you are locked into a fixed mortgage your payments will not fluctuate.
  • Equity. Home equity is typically a homeowner’s most valuable asset. That asset can be used later in life. To calculate equity, subtract any outstanding loan balances from the property’s market value. Home equity can increase over time if the property value increases or the loan balance is paid down. When you rent, you won’t have an asset when your lease expires.  The equity in your house can be used for emergencies, funding home renovations and even help with your nest egg. If you own your house for a long time, the value probably increased. As you get older, you may want to downsize. Selling your larger home to move into a condo or an apartment will free up some money to enjoy retirement.
  • Tax advantages. Owning a home might qualify you for some tax advantages or credits. As a homeowner, you may be able to deduct all interest paid on your mortgage. In January, after the end of the tax year, your lender will send your IRS Form 1098, detailing the amount of interest you paid in the previous year. The money you pay in property taxes may be deductible too. If you pay for your taxes through a lender escrow account, you’ll find the amount on your 1098 form.
  • Freedom. You may have some restrictions if you are a part of a homeowner’s association, but for the most part, how you decorate your home or landscape your property is pretty much your decision. You may also be able to add a wall to give you more privacy. Home ownership allows you to set down some roots, and there is a certain security in living in a home that you own.
  • Sense of belonging. Research has shown people feel a sense of worth and are more involved in their community when they purchase a home. It allows you to have a voice in community matters and boost your self-confidence.
  • Security. When you rent, your landlord can give you notice of breach of contract and terminate or not renew your contract. With your home, as long as you make your mortgage payments, you have a place to live. It is comforting knowing that you have a roof over your head.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

 

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