Hidden Homeownership Benefits

                                                                    




Anyone who purchases a home has a bunch of hidden benefits that aren't included in the trove of paperwork and documents that you're required to sign at closing. However, with good advice from a competent CPA and/or financial advisor, you may be able to take advantage of some financial and personal hidden benefits of owning a home. Let's get right to it and go through a list of the many hidden benefits of owning a home, some of them are financial and some of them aren't!

An Unexpected, Long Term Savings Plan

One of the best financial values of homeownership is easily how paying your mortgage can become a long term savings plan and debt reduction strategy. With each monthly mortgage payment you make, a portion goes toward reducing the amount you owe on your loan, which increases your equity. In a sense, paying your mortgage is a form of savings, as it increases the equity in your home. As your home increases in value, it creates more equity for you. There are many debt reduction strategies associated with making your payments as well. If you make two weekly payments for half of your mortgage amount, at the end of the year you'll end up paying an extra month's payment towards your mortgage which will generally tremendously reduce the long term amount of interest you're going to end up paying to your lender.
 

Mortgage Interest & Mortgage PointsTax Deduction

Speaking of mortgage interest, at this time, you can currently deduct the interest paid on up to $750,000 of mortgage debt if you're an individual taxpayer or married couple filing a joint tax return. It does halve to $375,000 for married couples filing separately. Additionally, if you paid any "discount points" at closing to lower the interest rate on your loan, you can deduct points over the life of the loan instead of the year you paid them. There are specific rules by the IRS for this so you should check to make sure you qualify. This is surely one of the smartest benefits when comparing owning a home to paying rent to someone else. Not all interest payments are the same, these are two that you can deduct when you file your taxes for the year. You should always consult a tax consultant or CPA about the options that you would legally benefit the most from.
 

Consistent Payment Plan

Having a mortgage will give you a consistent monthly payment over the term of the loan with a standard amortized loan. You pay the same amount on a month to month basis over the life of the loan for your principle and interest. The cost of the insurance and taxes may change from year to year but the base of the loan being the principle and interest is the same. Unlike the option with many landlords, if you have been consistent with paying your loan you can reach out to your lender and request extra time to pay if you get behind or fall on hard times. 
 

State and Local Taxes Deduction

A little SALT anyone? Not the salt that you use to season your steak dinner, State And Local Taxes (SALT) which includes property taxes can be deducted up to $10,000 for a single taxpayer and married couple filing jointly and that amount is halved for a married couple filing separately to $5,000. As a general rule, you can deduct half your property taxes as a filing deductable but again check with a CPA or tax attorney for the best option for you here.

Residential Energy Credit

Did you know that there's an eco-friendly based homebuyer tax credit called the energy-efficient property credit? The credit is applied when energy improvements made to a home such as wind turbines, energy-efficient upgrades, and the most popular currently installing solar panels. The credit can be as much as 30% of the cost of the improvement depending on what year the upgrades were made but act fast, the credit expires the last day of 2021!

Home Based Office Deduction

If you work from home or have a home-based business, you may qualify for the home office deduction whether you own a home or rent. To qualify, you must use a portion of your home exclusively and regularly for business purposes and show that your home is the main location used for conducting business. You have two options current, either taking $5 per square foot, up to 300 square feet for the business use of your home, or determine the percentage of your home used for business activities (don't forget to remove hallway and walking areas from the total area). 

Tax-Free Profits When You Sell

When you finally decide to sell your home, you'll have the benefits of tax-free capital gains up to $250,000 if you are single and up to $500,000 if you're married filing jointly. You must have lived in the home and used it as your primary residence for at least two out of the last five years before the sale date so keep that requirement in mind.

Creating a Good Credit Profile

Simply making your mortgage payment on time every month will help you build quality long term credit and raise your credit scores. Using your home's payment has a number of different benefits, keeping a roof over your family's head, long-term investment that you'll recoup when you move (unlike renting), and simply making an on-time payment will help you credit which can become VERY useful down the line when you look to refinance, take out a Home Equity Line of Credit (HELOC), or get other credit cards or loans with great payment terms.

It’s Your Home, Customize It

One of the best things about being a homeowner is that you get to release your creativity and become an arts and crafts master! You can choose what paint and colors you want on your walls, the way your yard is landscaped and designed, and practically anything else that you want to change on the home as long as you're within the rules of your governing area and homeowners association (if there is one). It's all about making you and your family at home and finding comfort every time that you walk through the door. Your home is your family's personal sanctuary so customize it to make you feel happy with your purchase. Coming home to a place of your own should create a psychological sense of pride and ownership in a place you can call your own! Keep in mind when you are looking to sell your home that some buyers may not appreciate your artistic qualities so staying neutral on color decisions as an example may be a great idea if you're looking to sell in the near future.

Opens Up Pursuits of Other Goals and Dreams

Maybe one of the most valuable hidden gems of owning a home is the option to refinance, pull out equity with a HELOC, or use it as collateral to get a loan to pursue other goals or dreams that you may have. After a few years of making your monthly mortgage payment and with market values generally increasing for real estate, you'll have the option to borrow money against your home in order to pursue other things that are important to you. Maybe you want to travel the world, maybe you've been thinking of starting a business, paying off a kid's college tuition, or pursuing other hobbies that are important to you and your family. Owning a home and having equity makes these options available to you where you wouldn't get those chances while renting. Maybe after 5-10 years, you want to pull money out of your home in order to buy other real estate investments which will provide a secondary form of income for your family. Having the option available if you'd like to use it is always a better position to be in than not having that ability at all.

Creates Generational Wealth

Homeownership generally is the first step for a family to create generational wealth and the ability to leave something of value to their kids and future generations when the time comes to do so. Having the option to give your future generations something of value that they can call their own or sell and help them financially is something that sometimes gets forgotten. Whenever you're making a payment towards your home, in addition to all the other benefits listed above, sometimes it's good to remind yourself that what you do today, is going to benefit your family in the future. Aside from speaking to an estate planner about things such as a will, life insurance, and other retirement options, properly creating wealth for your family members down the line through homeownership should also be in that discussion!