Benefits of Homeownership

Purchasing a home is a major milestone in a person's life, and often referred to as "The American Dream." Although, homeownership is more than just achieving a major milestone in an individual's life; it is a gateway to significant financial advantages. Here are the top four financial advantages to homeownership.

1. Taxes - The "IRS Publication 530" lists deductible expenses from the purchase of a qualified home. According to the IRS, a qualified home is your main home or your second home. A qualified home would be considered a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. The IRS defines your main home as the dwelling where you spend most of your time. You can only have and declare one main home at a time. The deductions for your main home include: real estate taxes, which are paid on your settlement statement or to a taxing authority (IRS 530, pages 2 and 3), home mortgage interest, which is the interest paid on a mortgage or loan secured by your main home or a second home (IRS 530, page 4), and business expense or rental income, which is a deduction, if you use part of your home for your business or rent out part of your home (IRS 936).

2. Protection Against Inflation - One of the main benefits of homeownership is the ability to lock in your mortgage payment with a fixed interest rate. Although, your taxes and homeowners insurance may increase over the years, these increases will likely be far less than how much typical rent will increase annually.

3. Increased Personal Wealth - For most homeowners, their home is their biggest asset. Most houses appreciate nominally per year, coupling this with the principal pay down on the mortgage; will result in an annual increase in the equity in the home. This is like no other asset that you can own, not only do you have the benefit of using this asset for personal use as long as you want to own it, but due to the principal pay down and appreciation of the home, most homeowners will make a substantial profit when they sell their home.

4. Diversification of Assets - For the typical individual, owning a home is their biggest asset. Coupling homeownership with other assets such as 401(k) retirement plans, IRAs savings, stocks, bonds, and other various investment instruments that can be used to create wealth will limit your risk as compared to more volatile assets. If the stock market goes down, possibly bonds or real estate may appreciate. Is a great way to protect yourself and your money long-term.

Even without considering appreciation and the pride of homeownership, the benefits of becoming a homeowner are financially advantageous, considering the significant tax savings, protection against inflation, avenues to increase your personal wealth, and a way to diversify your assets.

Article Source: http://EzineArticles.com/?expert=Michael_Zuren_PhD.

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