10 major benefits of homeownership
CONTENTS
1. Everyone's doing it.
2. Most millionaires made their money from real estate.
3. Home ownership doesn’t lock up your cash.
4. There's tax benefits.
5. Once you pay off your home, it’s yours.
6. A fixed-rate mortgage has no volatility.
7. Your rent building someone else's wealth.
8. You can write off home upgrades.
9. Banks are not trying to screw you.
10. You are creating generational wealth.
Brian Chevalier-Jordan
February 7, 2022
The views expressed in this article are solely the views of the author and do not necessarily reflect the views of Fortunately.
I read a lot of articles questioning the idea of homeownership. Usually, these think pieces are written from the perspective of someone who thinks the housing market is too expensive, but sometimes they are written from the perspective of someone who just doesn’t want the hassle of homeownership.
No matter who writes them, they are nearly always wrong. What both of these points of view are missing is that buying a home isn’t just an investment. It’s not that a home isn’t an investment but it’s also literally a roof over your head, which can give you great comfort in the years to come. In addition, even if owning a home were just an investment, it’s a pretty solid one. Last year, housing appreciated 18% year over year in the US. Not too shabby.
The other thing the anti-home ownership experts get wrong is they treat owning a home as a series of nightmare scenarios. Clearly, talking about the downside of owning a home gets more clicks, but it’s not the truth. Sure, the air conditioner goes on the fritz sometimes or the ice maker stops working, but how hard is it to go on Yelp or ask a neighbor for a good repair person? Owning a home isn’t a walk in the park, but it ain’t that bad either, with nearly two-thirds of Americans owning their homes.
So sit down, friend. I’m about to school you on why owning a home isn’t that big a deal and why it can actually be a MASSIVE wealth builder.
1. Most people, even the home haters, invest in real estate.
First, let’s start with the fact that most people, including that hater on homeownership, have real estate as part of their portfolio. That's because it’s much more stable than stocks, but also usually has higher returns than bonds. Most financial advisors recommend it as part of a well rounded portfolio.
2. The wealthiest people in the world heavily favor real estate.
When in doubt, do as the rich do. In fact, 90% of the world’s millionaires made their money from real estate, including a certain ex-President.
3. Home ownership doesn’t deplete or lock up your cash.
Almost no one buys a house in all cash. If you have a mortgage (65.8% of Americans do) that means comparisons between buying a house and investing are a false dichotomy. You might put down 20% of the value of the house, but you get 100% of the appreciation.
4. Owning a home has tax benefits.
Naysayers don’t even think about the tax benefits of owning a home. Aside from the fact that you can write off the interest payments you make (which in the early years of owning a home are the majority of your payment), you can also write off the property taxes up to $10,000 as well as some of the improvements you make. True, the tax benefits of those improvements usually only come when you sell, but they’re still real. How much of your rent does the IRS let you write off? Oh, it’s zero.
5. Once you pay off your home, it’s yours.
You own it free and clear. No more paying rent to your landlord for the rest of your life. No worry about being evicted or having the rent increase.
6. A fixed-rate mortgage has no volatility…unlike your rent.
Do you think your rent is going to stay the same for the rest of your life? I got news for you - that is never gonna happen. Your landlord is a businessperson, not a charity. They will continue to up your rent every year until you die but your fixed-rate mortgage stays the same.
7. Your rental payments are paying someone’s mortgage.
Why do you think your landlord rents out their property to you? It’s because you are paying their mortgage for them. Eventually, they will own the property you are renting and you will own exactly 0%.
8. You can write off home upgrades.
Let’s say you have to replace a major system in your house, like the heating system. Sure, it sucks, but now you are the proud owner of an upgraded heating system and you can write that off when you sell the house. In addition, some energy-efficient upgrades can be deductible right away.
9. Banks are not trying to screw you.
Banks want to loan you money not to trap you into a life of dependency on them or to give you more money than you can afford. Sure, they screwed up royally in 2008, but they don’t often get it wrong. They want to get their money back, so they are far more responsible and discerning than you can imagine. If they think you can afford it, trust me, you can afford it. They don’t just give hundreds of thousands of dollars to everyone. They have literally centuries of data on who can and cannot afford to borrow money.
10. Your house creates generational wealth.
The major asset you will own at the end of your life - your house - becomes a huge benefit to your heirs. They can live in it, sell it, or rent it out as they see fit. That is why housing is the largest source of intergenerational wealth transfer.
Of course, owning a home isn’t as simple as deciding you want one. There are major hurdles, most notably: the down payment. Check out Fortunately’s mortgage guide to explore your financing options and use our tool to see how much you can afford.
Brian Chevalier-Jordan
February 7, 2022
