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» Tax Benefits
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Saying goodbye to your landlord is only one of many benefits you will enjoy when you purchase a home. Consider these other advantages of homeownership:
1. You may qualify for tax breaks. Generally, you can deduct the interest you pay on mortgage debt, property taxes and loan points (fees charged by the lender) in the year you pay them. When you rent, you indirectly pay these expenses, but your landlord gets the tax benefits. You can visit our renting vs. buying section to learn more about savings.
2. You're investing in yourself. A part of every mortgage payment you make builds equity, which is the value in your house that's left over once you deduct the mortgage balance and other liabilities. Equity may allow you eventually to borrow money for other important expenses. These loans, called home equity loans, are generally offered at lower rates than other types of loans or credit. An added benefit: The interest you pay on home equity loans may be tax deductible!
3. You're protected from inflation. If you rent, inflation can increase your housing cost each year. For instance, at just 4% annual inflation, a $700 rent payment will increase to $1036 in 10 years and $2,270 in 30 years. A mortgage is usally fixed (or will have a cap if it's an adjustable loan), so the only increases to your monthly payment generally may be for property taxes and insurance.
4. Save on other debts . As a homeowner, you may be able to pay off or pay down your nondeductible debt (such as credit card, student loan, car loan, etc) by consolidating it into one home equity loan. Because the interest rate on your home is usually lower than on other types of loans, you may be able to save a lot in interest payments!
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