5 Financial Advantages of Owning a Home

by
Updated on July 29th, 2022

Reading Time: 3 minutes

buying vs. renting Guest post by Carl Spiteri, Benchmark Mortgage

Your home is your castle, but there are also many financial advantages of owning a home. Here are five ways that owning can be better than renting.

1. As a Hedge Against Inflation

Your rent will go up on a regular basis, while your payment on a 30-year fixed mortgage will always remain the same.

Let’s say your monthly rent is $1,800. Assuming inflation (your rent increase) is 3 percent, in five years your monthly rent will be $2,026. By then, you will have paid about $115,000 of your landlord’s mortgage.

Deciding between renting or buying your next home? Explore your options.

Compare the costs of renting vs buying and find a lender to secure your mortgage.

Deciding between renting or buying your next home?

Compare the costs of renting vs buying and find a lender to secure your mortgage.
2. To Build Your Personal Wealth

Stop paying your landlord’s mortgage. When you own your home, your mortgage amount is going down and your property value is going up.

No other investment, asset or debt is as misunderstood as a home. A home can be a wonderful and lucrative investment, but like any investment, it needs to be regularly reviewed, maintained and, when appropriate, sold. Even if your home is paid off, you still pay costs for repairs and upkeep, taxes and insurance. But like any investment, if you own it long term, take care of it and sell when the market is right, you stand to make a great gain.

3. Tax Savings (Federal and State)

Under Section 163 of the IRS code, interest on loans used to acquire, construct or improve real estate is deductible on up to a $1,000,000 mortgage.

Interest on loans tied to real estate for any reason is deductible on up to a $100,000 mortgage. For example, interest on the first $100,000 of a home equity line of credit (HELOC) is tax deductible.

Let’s say you make $100,000 per year and rent a home for $1,800 per month. You would have to pay taxes on your entire income of $100,000 when you are renting that home. If you purchase a home with a monthly payment of $1,800, you only have to pay taxes on $78,400 of your annual income because the interest you paid on your mortgage can be used as a tax deduction.

4. Asset Diversification

Unlike with a 401(k) or IRA, when you invest in a home you can live in it while the investment grows.

Owning a home over an extended period of time is usually more lucrative than renting. With good planning and execution, you can learn to minimize the cost of homeownership and maximize the ability to create real wealth. Many small business owners have a home office and can use the home office as a tax deduction while they are earning income. Other homeowners find that renting a room to a tenant helps them pay down their mortgage and gain equity faster.

5. Forced Savings

Monthly mortgage payments lower your mortgage, essentially creating a forced savings account.

In five years with a $1,800 monthly mortgage payment, you will have paid $29,331 of the principal on your mortgage. That would be money in your pocket if you choose to sell. For this example we use a $345,000 mortgage loan amount at a 4.75 percent interest rate, 4.881 percent APR and use a standard amortization table to come up with the principal pay down.

About Carl Spiteri and Benchmark Mortgage
Carl Spiteri, NMLS #286890, works for Benchmark Mortgage-San Diego, which puts on a free Smart Home Buyer Workshop the first Tuesday of every month. The workshop addresses ways to use your house as a tool for protecting current wealth and creating new wealth.

Note: This is a guest post; the views and opinions expressed are those of the author and do not necessarily reflect the opinion or position of Redfin.

If you are represented by an agent, this is not a solicitation of your business. This article is for informational purposes only, and is not a substitute for professional advice from a medical provider, licensed attorney, financial advisor, or tax professional. Consumers should independently verify any agency or service mentioned will meet their needs. Learn more about our Editorial Guidelines here.

Find the right loan for the home you love

Find the right loan for the home you love

Popular homes for sale

Home Image
$399,000
3 beds, 1.5 baths, sq ft
6622 W School St, Chicago, IL
Home Image
$1,199,000
4 beds, 3 baths, 2653 sq ft
1523 W 16th St, San Pedro, CA
Home Image
$865,000
2 beds, 2 baths, 1022 sq ft
2410 17th St NW #309, Washington, DC
Home Image
$1,925,000
4 beds, 4 baths, 2382 sq ft
547 35th Ave, San Francisco, CA
Home Image
$2,650,000
5 beds, 4.5 baths, 6085 sq ft
2600 Allston Ln, Austin, TX

Browse homes you'll love

See new home listings on the Redfin app every 5 minutes.
Start your home search on Redfin
Scroll to Top