Here Are The 5 Real Benefits of Home Ownership, Along With Their Cons

Purchasing a home is likely the largest purchase you will make in your lifetime, and it comes with several layers to it. There is a financial component to it, but it’s also an emotional and lifestyle decision as well.

It can be overwhelming to see the truth through the noise, especially when there’s immense pressure to purchase a home. From real estate agents and loan officers pressuring you to buy, and the narrative that you must buy a home to be wealthy — it can be dizzying trying to read through it all.

Here are the five real benefits of home ownership, and the caveats each come with.

Benefit #1: Buying a home is investing in yourself, but it’s also a liability

Many of the financial gurus on social media push the idea of investing in yourself first. By purchasing a home and paying the mortgage payment each month, part of that payment is “added” to your personal net worth. This, in turn, is paying yourself each month and investing in yourself.

In fact, the U.S. Federal Reserve released data in 2020 detailing the average net worth of homeowners versus renters. In 2019, the homeowner's median net worth was $255,000, while the renter’s net worth was $6,300. And since then, it’s likely that gap has widened.

The evidence is there that homeownership can make a drastic difference in your wealth building journey. However, it’s important to not kid yourself into thinking that buying a home into these myths about home ownership:

• Home prices only go up. This is not true. Home prices fluctuate based on supply and demand.
• Buying a home is the “best” investment out there. This is also not true. There are plenty of investments out there that have better performance than owning a home.
• Owning a home is a “true” asset. It’s arguable, but if your home is not paying you any sort of income, it’s more similar to a liability.
  

If you’re on the fence about owning a home from a money perspective, consider buying a home that you can make money from on a regular basis. This could be having a roommate pay you rent each month, renting out your garage or even purchasing a multi-family home to rent out the other units.

Benefit #2: There is an incentive to upgrade your home, but it comes at a real cost

When you’re renting, doing any upgrades to the home isn’t really worth it. You’re pouring money into a home you don’t own. And if the landlord specifically asks for you not to make any changes, you will either have to change it back or risk being charged fees when you move out.

However, when you own your home, there are real benefits to pouring money into it. You can make it look and feel exactly how you want it, while also potentially increasing the value of the home. While some things can be done yourself and on a budget, there are also projects that can be quite costly and require you to hire labor.

For example, if you want to replace your garage door, Zillow estimates you will spend roughly $4,000. While it can help the resale value of your home, it’s an expense you wouldn’t otherwise incur as a renter.

Benefit #3: There are significant tax incentives, but also more costs

As a renter, you don’t receive any incentives when filing your tax return. However, you also aren’t on the hook for property taxes, mortgage interest and other expenses.

You can receive several tax breaks as a homeowner, including but not limited to:

• Mortgage interest deduction
• Medically necessary home improvements
• Private mortgage insurance deduction
• Home office deduction
• Energy efficiency deduction
  

Of course, you’re spending more money as a homeowner, but these tax incentives can be quite valuable when tax season rolls around.

Benefit #4: Mortgage is locked in, but monthly costs can fluctuate

As a renter, the feeling of rent going up is always a possibility. Freddie Mac released a survey in August 2022 stating that nearly 60% of renters say their rent had increased. And in some cases, that rent price can go up dramatically — with one in three stating their rent spiked more than 10%. And with many Americans financially struggling, a sudden jump in living costs can be difficult to absorb.

With a fixed-rate mortgage, your monthly housing costs can stay essentially identical throughout the term of your mortgage. However, that doesn’t account for fluctuation in property taxes, insurance rates and unexpected maintenance costs. For example, your mortgage could be $2,000 per month, but you may need to replace your air conditioner — which brings your housing costs to $4,000 for the month. And those types of unexpected expenses can leave your savings in a less than optimal situation.

Moreover, if you live in a homeowners association, you could get an unexpected assessment charge or a fine for violating the rules.

Again, there is stability in owning your own home, but it doesn’t guarantee that your monthly housing cost will truly remain the same month to month.

Benefit #5: Social benefits, but it gives you less flexibility

When you live in a primarily rental community, you may experience difficulty in building a sense of community as people come and go. When you own, you may be able to build a sense of camaraderie with your neighbors as you all live and possibly work near one another.

As a homeowner, that sense of community comes at the cost of giving up flexibility in where you live.

As a renter, you can essentially up and leave at any time. While there may be fees and penalties to break your lease, you have the freedom to move without any significant friction. As a homeowner, you lose that same flexibility.

Generally speaking, it’s recommended that a homeowner hold onto a home for 7-10 years. This is because of the overhead costs associated with purchasing a home. Additionally, homes take time to appreciate in value, so buying and selling within a short period of time could result in financial losses.