Saturday, June 14, 2014, AM | Leave Comment
There is an old saying that goes, “He who pays rent, makes landlord rich.” Most people who rent a home do not understand this quote. They pay their landlord faithful every month and as long as the landlord is getting paid, he’s happy. There are several reasons why buying a home rather than renting will save you more money.
Securing a Mortgage and Building Equity Means More Money
One of the first ways buying a home saves more money is because you are able to build equity. According to Performance Mortgage & Credit Services Ltd., Edmonton mortgage brokers, most people will need to secure a mortgage to buy a home. As you pay your mortgage balance down, typically over time, the value of your home goes up as well. The difference between your home value and the mortgage balance is your equity. It’s almost like a forced savings account.
Save Money Buying Your Next Home
You can borrow against your equity to do home repairs, consolidate credit cards, or start a business. Generally, if you have built up some equity in your home, once you sell it, you can cash out on the balance minus any fees at the closing. You can also use you equity to buy a new home. This means you may end up putting nothing down out of your pocket to purchase your next residence.
Another Word About Equity
Once you have paid your mortgage balance down to zero, you will have a totally free and clear house. The only thing left to pay are your property taxes and homeowners’ insurance. How does this save you money? Let’s say your monthly house payment was $1000 per month. Once you’ve paid off your mortgage, you now have that same $1000 per month to save or spend on what ever you want.
How Paying Taxes and Interest Can Save You Big Money
Home ownership is still one of the last great tax shelters. There are several exemptions you can claim if you are buying your house. Your monthly payment usually includes principal, interest, taxes, and insurance (PITI). Your income tax liability can be reduced by property tax exemptions and interest payment exemptions.
Another great tax exemption can come from running a home based business from your home. The portion of your home that you use for your business can be deducted from your income taxes. You should check with your accountant for more advice on qualifying for this type of deduction.
Save More and Sleep Better Too!
Aside from the pride and joy that comes automatically with home ownership, knowing that you’re saving money every time you make a payment will help you sleep much better at night.