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Rent Free: 3 Major Ways Home Ownership Changes Your Finances

Written by Posted On Monday, 14 August 2017 13:20

Owning your own home has been a long-term financial goal. Living rent-free seems like the ultimate freedom. Eventually, once your home is paid off, you'll be able to put that money into other things each month! Before you jump into home ownership, however, you need a strong understanding of how home ownership will change your finances.

 

Your Mortgage May Be Less Than Your Rent Payment

Your mortgage is the percentage of your home's value that you'll pay each month. Early in the home ownership process, you may find that you're paying more toward the interest each month than you are toward the principal or the initial amount of the loan. This is standard, but if you aren’t sure, firms like Premium Mortgage Corp often have materials available that can teach you more about the mortgage.

 

In some cases, you may find that your mortgage payment is less than the amount you paid in rent in the past--especially if you had a strong down payment to put down on your home. In this case, you have two choices: use those funds for other things, or pay down your mortgage sooner. Make sure, before you make early payments, that your lender doesn't add penalties for early repayment!

 

You'll Have Payments You Don't Expect

If you've never owned a home, you need to carefully evaluate the added costs that may come along with home ownership. It's not just about paying the mortgage! You'll also need homeowner's insurance, money to pay your property taxes each year, and basic maintenance on the house. You'll also need to calculate the cost of any voluntary improvements you make to your home, from adding a fence to putting in a swimming pool. The good news is, many of these little improvements also add value to your home.

 

You'll Build Equity

When you're renting, improvements made to your home put money in someone else's pockets--and the money you pay toward your rent each month is gone forever. When you own your own home, on the other hand, each home improvement and each month's mortgage payment helps you build a little more equity in your home. Over time, you'll substantially add value to your investment.

 

Home ownership is life-changing. It doesn't just increase your enjoyment of the property, thanks to the fact that you no longer have to live by a landlord's rules or wait for them to fix something that's been broken. It also helps free your finances and help you build equity. For many families, home ownership isn't just the goal of financial security. It's also a great step along that path.

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