Buying a home is most likely the biggest investment you will ever make. When you discover your “dream house,” you may be inclined to jump at the opportunity. But it’s a good idea to temper your impulses with other factors like interest rates, housing prices, and your overall financial situation.
Advantages of Homeownership
Tax benefits can be an advantage of owning your own home. They allow you to claim a deduction on your mortgage interest and property taxes, thus lowering your overall tax liability.
Taking out a mortgage to purchase a home has the benefit of monthly fixed payments, which are easy to manage and anticipate. Your mortgage payment is determined by the size (amount) and terms (length) of the loan. Terms of the loan can be fixed over a period of time, or variable, meaning the interest rate will change over time. Principal, interest, taxes, and insurance are factored in to calculate the mortgage payment.
The amount renters pay is subject to the will of the owner, but chances are the rent will increase over time. In addition, the landlord can choose to sell the dwelling, meaning you’ll have to find another place to live.
Making timely mortgage payments is also good for your credit score, the tool lenders use to determine your creditworthiness for a loan or credit card. Your credit score affects the interest rate you are charged. Making regular payments will improve your credit score overtime, and many lenders offer automatic bank drafts to help you avoid missing a payment.
These and other key insights are outlined in a recent column in Baltimore Gay Life by Amanda Wooddell, a Manager at SC&H Financial Advisors, the Personal Financial Planning practice at SC&H Group.