or several years following the recession of 2008, rates of homeownership in the United States declined. They’ve seen a slight uptick recently, though, and more people are starting to take an interest in buying homes rather than continuing to rent.
Have you been on the fence about buying a home? You might change your mind if you knew about all of the wealth-building benefits homeownership has to offer, especially if you buy in a major city like Phoenix (the fastest growing city in the U.S.).
Explained below are some of the greatest wealth-building benefits of buying a home in Phoenix, Arizona.
1. Put Your Money Toward Making Something Yours
There’s no doubt about it. Buying a home is a big decision and a major investment, even if you’re buying a relatively small property like a condo or townhouse.
It does cost more money upfront to become a homeowner rather than continuing to rent, and this can be a turn-off to a lot of people, especially young adults who are still getting on their feet. That being said, you’re going to end up paying money toward housing every month whether you decide to buy or rent.
When you buy a home, though, that money actually goes toward eventually making something yours. When you rent, you’re essentially throwing money down the drain every month.
There’s also not a lot of security as a renter. Even if you’re a model tenant, your landlord can still throw you out at the end of your lease and leave you scrambling to find somewhere else to live.
When you buy, on the other hand, as long as you continue making your mortgage payments on time, you’re working toward that house becoming yours and, eventually, you won’t have to make those payments anymore.
2. Force Yourself to Save
A lack of savings is a serious issue for a lot of Americans. In fact, one-fifth of the adult population does not have any money saved at all. Homeownership can help with this.
When you buy a home, you also create something of a “forced savings account.”
Remember, as you make your monthly mortgage payments, over time, you build up equity. The more time you spend paying off your mortgage, the more equity you are able to build since less of the money will be going toward interest.
Keep in mind, too, that building equity in your home can also give you leverage in the future should you need to borrow money. You can take out a home equity loan or home equity line of credit against the equity in your house.
3. Protect Yourself Against Inflation
If you currently rent a house or apartment and have been for a while, you’ve likely experienced an unpleasant and unwelcome increase in your rent price.
Rental prices are rising throughout the country, and they’re rising at a rate faster than what a lot of people can afford to keep up with. This is part of the reason why more people are pursuing homeownership.
The great thing about buying a home is that your mortgage rate won’t increase from year to year without much — if any — warning (the way rental prices often do). Homeownership provides you with some protection against inflation. Assuming you have a fixed interest rate on your home loan, you’ll get to pay the same price each month toward eventually owning your property outright.
4. Enjoy Great Tax Benefits
There are quite a few tax benefits of which homeowners get to take advantage.
As a homeowner, for example, you get to deduct a portion of the expenses associated with owning your property from your annual tax bill. This includes your mortgage interest, which can equate to thousands of dollars put back in your pocket each year.
You’re also able to deduct a portion of your state and local taxes (this includes your annual property taxes).
As an added bonus, should you take out a home equity loan or home equity line of credit to make improvements to your home in the future, you can also deduct the interest you pay on those loans/credit lines.
5. Earn Additional Income by Renting
Owning a home also provides you with an opportunity to earn passive income. Many homeowners decide to rent out their property (or even a portion of it, such as a basement or mother-in-law apartment) as a way to bring in additional income.
If you find that you want to buy another property in the future, or if you just want to pay off your mortgage faster and earn additional money to help you reach your specific wealth-building goals, renting is an effective and somewhat easy way to do this.
Of course, you have to weigh the pros and cons of being a landlord (or hiring a property management company to handle issues with renters on your behalf), but this can still be an effective way to increase your wealth and diversify your portfolio.
6. Outperform Other Modes of Investing
There are definitely other ways to build wealth besides real estate. However, other modes of investing, such as buying stocks and bonds, typically do not perform as well long-term as real estate ownership.
In most cases, due in part to all of the tax benefits that they get to enjoy, homeowners tend to see greater returns on their investments than those who only invest in the stock market.
This isn’t to say that you shouldn’t also work on building your stock portfolio. However, if you were to only invest in the stock market and not become a homeowner, it would be unlikely that you’d build as much wealth as if you did both.
Look into Buying a Home in Phoenix Today
As you can see, there are lots of ways that buying a home in Phoenix can help you to build more wealth and make your money work harder for you.
Now that you know more about the wealth-building opportunities that being a homeowner provides, what are you waiting for? Why not start the process of buying a home in a beautiful place like Phoenix today? There are lots of home buying programs available for buyers looking for options.