When people think about buying a home, they might imagine a day when the mortgage is paid in full and they can enjoy the freedom of not having to make those monthly payments. But you don’t necessarily have to shed your mortgage in your lifetime for a home purchase to be worth it. Here’s what you could gain from buying a home, even if you never end up owning it mortgage-free.
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The Opportunity to Build Equity
The opportunity to build equity is often touted as a benefit of homeownership. As Sarah DeFlorio, vice president of mortgage banking at William Raveis Mortgage, says, “If you’re paying rent, you’re paying someone else’s mortgage.” And you can still build and benefit from home equity even if you never pay off the mortgage attached to your home.
“Real estate has long been a strong asset class in terms of appreciation,” DeFlorio says.
Since homes tend to gain value over time, even if your home isn’t paid off, you may still be able to sell it at a profit and pocket the difference.
For example, if you buy a $500,000 home whose value doubles in 10 years, selling it for $1 million could constitute a huge payday for you, even if you still owe $300,000 on your mortgage and even after factoring in real estate agent fees.
Furthermore, the equity build-up many homeowners get to enjoy is akin to forced savings, says Sean Wilkoff, assistant professor of finance at the University of Nevada, Reno.
“Monthly mortgage payments quietly function as a savings mechanism,” he explains. “A portion of every payment builds equity, creating a store of value you can access later through selling, refinancing or borrowing. For many households, this is one of the most reliable ways wealth accumulates over time.”
Income Flexibility
These days, side hustles are all the rage. Many folks routinely shuttle people around in their cars or deliver food to earn extra money. But if you own a home, it could become another income stream, even if you never pay it off.
As Wilkoff explains, homeownership gives you plenty of options for monetizing your living space. “You can rent out a room, add an accessory unit or otherwise generate income from the property — something renters generally can’t do,” he says.
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Tax Advantages
Owning a home could also benefit you tremendously from a tax perspective. As Wilkoff says, “Depending on your situation, you may benefit from mortgage interest deductions, property tax deductions or the ability to write off a home office.”
Not only could these deductions serve to lower your overall tax bill, but they could also meaningfully lower the effective cost of ownership, Wilkoff explains.
Wealth Transfer Potential
People don’t always buy homes with the intent to pass them from generation to generation. But when you own a home, that option exists — even if there’s a mortgage involved.
“Even if the mortgage remains outstanding, a home can still function as a vehicle for intergenerational wealth transfer,” Wilkoff says. Heirs can benefit from inherited equity and long-term appreciation.
Plus, says Wilkoff, if you leave your home to your heirs and there’s an outstanding mortgage balance, they could always seek to assume that loan or refinance under different terms if they’re interested in keeping the home.
Predictable Costs
When you rent a home, you’re subject to rent increases every time your lease renews. Another benefit of homeownership, says DeFlorio, is that with a fixed-rate mortgage, a large chunk of your housing costs are set in stone.
Even an adjustable-rate mortgage, she explains, gives you predictable mortgage payments for a period of time.
That said, DeFlorio does caution that homeownership costs like property taxes, insurance and maintenance can rise over time, so that’s something to be mindful of. But if you don’t plan to pay off your home, you could conceivably sell it if your peripheral costs become too high.
Control Over Your Living Space
When you rent a home, you have to play by your landlord’s rules. Ownership gives you control over your living space, allowing you to customize your home to meet your needs and style.
“Ownership means autonomy,” Wilkoff says. “You can renovate, paint, remodel, add on or reconfigure your home to fit your life without asking permission.”
Plus, if you own your home, says DeFlorio, you may be more motivated to make it a more comfortable and enjoyable place to live.
“People feel like it doesn’t necessarily make sense to invest in the space they’re renting in,” she explains. When you own a home, “there are a lot of things you would probably do to make a living space more comfortable that you wouldn’t do if you were renting.”
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No Restrictions on Pets
If you’re an animal lover, you could face restrictions if you’re somebody else’s tenant. Another benefit of buying a home, says DeFlorio, is being able to choose a pet without limits on size or breed.
The Option to Customize As Your Needs Change
Even if you don’t plan to pay off your home, you may end up living in it longer than expected. And during that time, your needs and health might change. The benefit of owning a home is that you can adapt that space accordingly.
“A home evolves with you,” Wilkoff says. If you need to add an extra bedroom to accommodate a nursery, the option is there. If you need to retrofit a bathroom because you’re getting older and your mobility is waning, you can do that without asking anyone’s permission. That flexibility is extremely valuable.
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What You Gain From Buying a Home That You Never Plan to Pay Off originally appeared on usnews.com
