- November 22, 2023
- Posted by General Electric Credit Union
- 4 read
3 Extraordinary Benefits of Homeownership
GECU Voices brings you guidance and insight from experts within the Credit Union. Today’s blog post was penned by Aaron Williams, Mortgage Loan Originator.
Some young adults may feel that homeownership is out of reach or no longer beneficial and continue renting as a result. While what’s right for you will depend on your unique needs, financial and otherwise, owning a home continues to provide a range of benefits. Below are a few to consider as you weigh your options.
The top benefits of homeownership
Homeownership allows you to build equity, which is the difference between the current market value of your home and the outstanding mortgage balance. As you make mortgage payments, a portion goes toward paying down the principal, which increases your equity. When you pay rent, that money won’t provide any additional value to you. Instead, it goes directly to your landlord or property management company.
This matters because you can leverage your equity to make borrowing, such as for home renovations, more affordable. These include:
- A home equity line of credit (HELOC). This is a rotating line of credit that allows you to borrow up to your credit limit and make interest-only payments until the repayment period begins, which is often years later.
- A home equity loan. These loans function similar to personal loans, but with one major difference. They are secured by an asset: your home. You’ll typically have access to much lower rates on a secured loan, which equals lower monthly payments and less paid in interest over the life of the loan.
Regardless of which home equity product you choose, it’s important to evaluate your budget before applying to verify you can comfortably afford payments.
2. Tax write-offs
Homeownership can provide tax advantages, including deductions on mortgage interest and property taxes. These tax write-offs can reduce your overall tax liability, making homeownership more affordable.
Mortgage interest is typically the most significant tax deduction for homeowners. In the early years of your mortgage, a substantial portion of your monthly payments goes toward interest, which can translate into significant tax savings. Consult with an accountant regarding your personal tax situation.
3. Value appreciation
The second you drive a car off the lot, its value decreases between 9-11%.1 Historically, real estate has shown the potential to appreciate over time, making it unique amongst your debt profile. While it's essential to note that there are no guarantees in the real estate market, long-term trends have generally shown property values to increase.
Appreciation can occur due to factors like inflation, increased demand in a desirable location, and improvements you make to the property. This potential for your home to become more valuable over time can be a source of long-term financial stability.
It's important to note that while homeownership offers many advantages, it also comes with responsibilities, such as property maintenance, insurance, and property taxes. Additionally, the real estate market can be subject to fluctuations, and there are no guarantees of appreciation. However, for many people, homeownership remains a key component of their long-term financial strategy.
General Electric Credit Union (GECU) is proud to offer 1:1 guidance for mortgage loans. We’ll assign you one point of contact who will handle your application from start to finish. Schedule an appointment to go over your mortgage loan options or apply for one online today.