Buying a home is the American dream and one of the big rites of passage in life, like graduating or getting married. Despite the sluggish market, in 2010 over 2.5 million Americans entered the ranks of first-time homeowners. And that number has just been growing every year since. Although the process of buying a home can be overwhelming and taking on that big mortgage debt can be a little frightening, buying a home is definitely a good move. It can enhance your quality of life, and it makes good financial sense. So let’s take a quick look at the 5 financial perks of being a homeowner in Los Angeles.
1. Tax Benefits
Probably the first financial perk of being a homeowner in Los Angeles that comes to mind for most people is that of the solid tax benefits. When tax time rolls around in April, you can, as a homeowner, take deductions for mortgage interest and property taxes. “This deduction,” according to real estate pros, “is particularly useful for off-setting the initial financial blow that comes with purchasing your property, since in the first years of owning your home you’re mostly just paying off the interest on your mortgage, as opposed to principal.” You can also usually write off mortgage points in the early stages, and that can mean significant savings.
Just be aware that the 2017 revisions to tax laws have changed things a bit. The cap on mortgage interest deductions is now “$750,000 of your total mortgage debt. Including any home equity credit.” Formerly, the limit was $1,000,000 with an added $100,000 for home equity credit. Fortunately, most of us don’t have to be concerned with the huge numbers involved here.
2. Home-Equity Advantage
Another major financial perk of being a homeowner in Los Angeles is the simple fact that you will be building more and more equity the longer you own your home. As a result, you will be increasing your net worth, especially if you ever want to sell your home down the road. Here’s how one top financial site explains it: “Home equity is considered to be the current market value of a home minus any outstanding liens or home loan balances, and . . . the rate of return on a housing investment significantly increases the longer it is held.”
An additional advantage of home equity is that you can leverage it for funds in the case of an emergency, say, college tuition or medical bills. As your equity increases, you can use it to secure a home equity loan when you need a sudden infusion of cash. You could even borrow against your home equity to make improvements that will make your home worth even more.
3. Long-Term Investment Potential
Also, being a homeowner in Los Angeles carries with it significant long-term investment potential, providing the opportunity to increase wealth over the long haul. Housing markets do fluctuate, and home values occasionally go down. But, typically, homes appreciate and increase in value over the years. That’s one of the good things about inflation because it makes a home a good long-term investment.
According to FederalReserve Board statistics, “the average homeowner ultimately develops a net worth of $184,000 while the average renter’s net worth is only $4,000.” And that’s an enormous difference. In addition, when you’ve finally paid off your mortgage, you can live rent free from then on. Buying a home, then, is a sound investment in your future.
4. Cost Control and Budgeting Benefits
An often overlooked financial perk of being a homeowner in Los Angeles (as opposed to renting) is that you have much more control over your housing-related costs and so are better able to budget. With a mortgage you know exactly how much you have to pay each month, but as a renter your monthly rent can go up at any time. And as a renter, you typically have to use the appliances that come with the rental property. But being a homeowner in Los Angeles allows you to install energy-efficient appliances to reduce your monthly costs. The long and the short of it is that as a homeowner you can save money and have greater financial stability, which allows for better long-range planning.
5. Home-Improvement Advantages
While this isn’t exactly a financial perk, it is an important perk of being a homeowner in Los Angeles. And this is that you can, whenever you want, make home improvements. And the money you invest in home improvements will ultimately make you money because most improvements increase a home’s value. As a renter, you would probably have to spend a long time hammering out arrangements and details with the landlord in order to make any improvements to the property. And then it wouldn’t give you any long-term financial advantage. Home improvements, especially remodels and upgrades (which you can make on a whim as a homeowner), are usually good investments.
Contact Your Local Agent
But you still have to purchase that home in order to enjoy these perks of being a homeowner in Los Angeles. And that also means you need to buy a home that really is a good investment – and not a money pit. That’s where your qualified local real estate agent can be a huge help and a valuable ally.