LESSON 1: The Multiple Benefits of Homeownership

Owning a home offers significant financial and personal advantages. Homeownership works as an investment, a tax shelter, a savings opportunity and a source of personal satisfaction for millions of Americans.

Homeownership is a durable (real) investment. Like most investments, there are no guarantees as to how much a particular home will appreciate (increase in value) over time. However, decades of generally increasing home values have favored most homeowners with good returns on their home-purchase investment.

Owning your own home doesn't just provide shelter -- it provides a tax shelter. Homeowners benefit from a number of tax advantages unavailable to renters. Chief among them is the mortgage interest tax deduction, which allows you to deduct (with certain limitations) the thousands of dollars in interest you pay on your home loan every year. In fact, the deduction is available for interest on second mortgages, equity loans or lines of credit, and second homes too -- again, with certain limitations.

Looking at "after tax" take-home income, the mortgage interest tax deduction alone can sometimes make owning a home less expensive than renting. (You'll find a detailed discussion of homeowner tax benefits in a separate lesson.)

Paying back the principal (borrowed amount) of your mortgage is a solid form of savings. Over time, your monthly payments increase your equity (share of ownership) in the home. You can "withdraw" those savings by selling your home or by taking out an equity-based loan.

Often, homeowners can move up to a larger or more expensive home using the equity from the sale of their first home as a down payment. Or, they can simply tap their equity (through a home equity loan) to purchase a second home, pay for college expenses, make home improvements, or retire high-interest rate debt.
Owning a home puts you in control. You have greater financial control because your housing costs are more predictable than a renter's -- even if you choose an adjustable-rate mortgage (ARM). And you can remain in your home as long as you meet your ownership obligations, rather than facing lease expiration at the discretion of some other property owner.

Owning a home allows you more freedom to choose your community, styles of architecture and decor, appliances, and other lifestyle options. In short, homeownership offers a level of comfort, security and personal pride that renting simply can't provide.

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